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Higher business
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Jul 8, 2025
•
Advantages and Disadvantages of Retained Profit and Loans in Business
Lauren
@lauren_b
Sources of Finance: A Comprehensive Guide
This document provides an in-depth look at various sources of finance available to businesses, explaining their characteristics, benefits, and drawbacks.
- Covers a wide range of financing options, from internal to external sources
- Explains key features and implications of each financing method
- Suitable for students and entrepreneurs seeking to understand business financing options
Retained Profit
Retained profit refers to profits from previous years reinvested into the company.
Definition: Retained profit is profit that has been made by the business in previous years that is then reinvested back into the company.
Advantages of retained profit include:
- Can be used for larger purchases or bulk buying
- The business doesn't incur debt
Highlight: Using retained profit for expansion can be advantageous as it doesn't require external borrowing.
Disadvantages of retained profit include:
- It may take too long to accumulate, potentially causing missed business opportunities
Vocabulary: Retained profit disadvantages refer to the limitations of using this internal source of finance.
Sale of Assets
This involves selling items the business no longer needs, such as machinery or transport.
Advantages:
- Raises money to reinvest in other areas of the business
- Boosts cash flow
Disadvantages:
- If finance is urgently required, assets may be sold for less than their worth
Share Issue
Available only to private or public limited companies, this involves issuing more shares to obtain finance.
Advantages:
- Large amounts of finance can be raised
- Finance doesn't need to be repaid
Disadvantages:
- Shareholders need to be paid dividends annually
- Shareholders become part-owners of the business
Example: A growing tech startup might issue shares to fund its expansion into new markets.
Bank Loan
A long-term source of finance where a fixed amount is borrowed and repaid with interest over time.
Advantages of bank loans for business include:
- The business can budget for repayments
- Essential equipment can be purchased in advance and paid back over years
Highlight: Bank loan advantages and disadvantages should be carefully considered before borrowing.
Disadvantages of bank loans in business:
- Interest must be repaid along with the loan amount
- Small businesses may find it harder to secure loans and often face higher interest rates
Commercial Mortgage
A long-term finance source secured against a business property and repaid in instalments.
Advantages:
- Mortgage is given for a long period
- Large amounts of finance can be raised quickly
Example: A restaurant owner might use a commercial mortgage to purchase the building they operate in.
Disadvantages of mortgage in business:
- Interest is charged on the loan
- Property can be lost to the lender if repayments are missed
Debt Factoring
A short-term finance source where firms sell their invoices to a factor for immediate cash.
Advantages:
- Time and effort saved on recovering unpaid debts
Disadvantages:
- Money is lost as unpaid debts are sold at a reduced value
Debentures
Loans given to the business by individuals, with interest paid annually and the loan repaid in full at an agreed future date.
Advantages:
- Control of the business is retained
- Can be paid back over a long period
Disadvantages:
- Interest must be paid even if the company makes a loss
Government Grants
Fixed amounts of money awarded by the government, EU, or charitable organizations, often with specific conditions.
Definition: A grant is a fixed amount of money usually awarded by the government, EU, or charitable organisations, given on the condition that certain criteria are met.
Advantages and disadvantages of government grants: Advantages:
- Does not need to be repaid
- Often offered as an incentive to help businesses start or expand
Disadvantages:
- Business needs to meet certain criteria
- Time-consuming application and paperwork process
Venture Capital
Money provided by investors to starting or expanding companies, often involving higher risk.
Venture capital advantages and disadvantages: Advantages:
- Large amounts of investment can be gained
- Venture capitalists are willing to take on riskier investments than banks
Disadvantages:
- Control and a share of profits are given up to venture capitalists
Crowd Funding
Small amounts of money raised from a large number of people, typically through the internet.
Advantages:
- Finance can be raised from individuals when banks see a venture as too risky
- Some funds are donated, requiring no repayment
Disadvantages:
- Public requests for investment risk the project being copied by competitors
- If the targeted amount isn't reached, the money is returned to investors and the business gets nothing
Highlight: Understanding the advantages and disadvantages of retained profit, bank loans, mortgages, and other financing options is crucial for making informed business decisions.
We thought you’d never ask...
What is the Knowunity AI companion?
Our AI companion is specifically built for the needs of students. Based on the millions of content pieces we have on the platform we can provide truly meaningful and relevant answers to students. But its not only about answers, the companion is even more about guiding students through their daily learning challenges, with personalised study plans, quizzes or content pieces in the chat and 100% personalisation based on the students skills and developments.
Where can I download the Knowunity app?
You can download the app in the Google Play Store and in the Apple App Store.
Is Knowunity really free of charge?
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The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
Advantages and Disadvantages of Retained Profit and Loans in Business
Lauren
@lauren_b
This is a comprehensive overview of various sources of finance for businesses, detailing their descriptions, advantages, and disadvantages. The document covers a wide range of financing options, from internal sources like retained profit to external sources such as bank loans,... Show more
Sources of Finance: A Comprehensive Guide
This document provides an in-depth look at various sources of finance available to businesses, explaining their characteristics, benefits, and drawbacks.
- Covers a wide range of financing options, from internal to external sources
- Explains key features and implications of each financing method
- Suitable for students and entrepreneurs seeking to understand business financing options
Retained Profit
Retained profit refers to profits from previous years reinvested into the company.
Definition: Retained profit is profit that has been made by the business in previous years that is then reinvested back into the company.
Advantages of retained profit include:
- Can be used for larger purchases or bulk buying
- The business doesn't incur debt
Highlight: Using retained profit for expansion can be advantageous as it doesn't require external borrowing.
Disadvantages of retained profit include:
- It may take too long to accumulate, potentially causing missed business opportunities
Vocabulary: Retained profit disadvantages refer to the limitations of using this internal source of finance.
Sale of Assets
This involves selling items the business no longer needs, such as machinery or transport.
Advantages:
- Raises money to reinvest in other areas of the business
- Boosts cash flow
Disadvantages:
- If finance is urgently required, assets may be sold for less than their worth
Share Issue
Available only to private or public limited companies, this involves issuing more shares to obtain finance.
Advantages:
- Large amounts of finance can be raised
- Finance doesn't need to be repaid
Disadvantages:
- Shareholders need to be paid dividends annually
- Shareholders become part-owners of the business
Example: A growing tech startup might issue shares to fund its expansion into new markets.
Bank Loan
A long-term source of finance where a fixed amount is borrowed and repaid with interest over time.
Advantages of bank loans for business include:
- The business can budget for repayments
- Essential equipment can be purchased in advance and paid back over years
Highlight: Bank loan advantages and disadvantages should be carefully considered before borrowing.
Disadvantages of bank loans in business:
- Interest must be repaid along with the loan amount
- Small businesses may find it harder to secure loans and often face higher interest rates
Commercial Mortgage
A long-term finance source secured against a business property and repaid in instalments.
Advantages:
- Mortgage is given for a long period
- Large amounts of finance can be raised quickly
Example: A restaurant owner might use a commercial mortgage to purchase the building they operate in.
Disadvantages of mortgage in business:
- Interest is charged on the loan
- Property can be lost to the lender if repayments are missed
Debt Factoring
A short-term finance source where firms sell their invoices to a factor for immediate cash.
Advantages:
- Time and effort saved on recovering unpaid debts
Disadvantages:
- Money is lost as unpaid debts are sold at a reduced value
Debentures
Loans given to the business by individuals, with interest paid annually and the loan repaid in full at an agreed future date.
Advantages:
- Control of the business is retained
- Can be paid back over a long period
Disadvantages:
- Interest must be paid even if the company makes a loss
Government Grants
Fixed amounts of money awarded by the government, EU, or charitable organizations, often with specific conditions.
Definition: A grant is a fixed amount of money usually awarded by the government, EU, or charitable organisations, given on the condition that certain criteria are met.
Advantages and disadvantages of government grants: Advantages:
- Does not need to be repaid
- Often offered as an incentive to help businesses start or expand
Disadvantages:
- Business needs to meet certain criteria
- Time-consuming application and paperwork process
Venture Capital
Money provided by investors to starting or expanding companies, often involving higher risk.
Venture capital advantages and disadvantages: Advantages:
- Large amounts of investment can be gained
- Venture capitalists are willing to take on riskier investments than banks
Disadvantages:
- Control and a share of profits are given up to venture capitalists
Crowd Funding
Small amounts of money raised from a large number of people, typically through the internet.
Advantages:
- Finance can be raised from individuals when banks see a venture as too risky
- Some funds are donated, requiring no repayment
Disadvantages:
- Public requests for investment risk the project being copied by competitors
- If the targeted amount isn't reached, the money is returned to investors and the business gets nothing
Highlight: Understanding the advantages and disadvantages of retained profit, bank loans, mortgages, and other financing options is crucial for making informed business decisions.
We thought you’d never ask...
What is the Knowunity AI companion?
Our AI companion is specifically built for the needs of students. Based on the millions of content pieces we have on the platform we can provide truly meaningful and relevant answers to students. But its not only about answers, the companion is even more about guiding students through their daily learning challenges, with personalised study plans, quizzes or content pieces in the chat and 100% personalisation based on the students skills and developments.
Where can I download the Knowunity app?
You can download the app in the Google Play Store and in the Apple App Store.
Is Knowunity really free of charge?
You have the choice, we offer a 100% secure payment via PayPal or an Amazon gift card. There is no limit to how much you can earn.
Can't find what you're looking for? Explore other subjects.
Students love us — and so will you.
4.9/5
App Store
4.8/5
Google Play
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user