. Sources of internal capital
- Personal savings
This refers to the owner must have worked and saved income overtime in order to accumulate • enough to start a business.
- Sale of personal assets
This may mean selling part of the owner?s idle or under-utilized assets. The same assets may also be converted for use in business. They may not be money but are representation of money therefore the owner?s contribution.
- Family/relatives and friends
This is a popular source of equity financing. Friends and family in most cases are not worried about quick profits as professional investors are. However, one should be careful when using money from friend?s family because some may want to get involved in running the business.
It may also create conflict and disharmony in families.
-Operating Income
A better source of capital for a company than debt or equity is a positive operating income from quarter to quarter. This is because the company is generating that positive operating income from its own successful business operations. Operating income is also known as earnings before interest and taxes or EBIT. Operating income or EBIT is used to determine how successful the firm's business, actually is.
Positively operating income will generate cash reserves for the firm and eliminate the need for equity financing which is the best of all scenarios for a business firm.
marto answered the question on February 4, 2019 at 07:34
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