What are internal funds?
Internal funds are a reference to the type of money that are generated from society, unlike those generated from external sources. In other words, this type of funding is entirely originating in society itself or its activities concerning the realization of this goal. Therefore, internal funds can be created by plowing profit back to another investment, selling some of the company assets or aggressive towards the implementation of larger capital.
An example of the application of the concept of internal funds can be seen in a situation where someone wants to establish a company. Assuming that the person has $ 100,000 in the bank (USD) and the total cost of establishing the company is $ 95,000, it could use $ 95,000 USD to be founded. In this case, $ 95,000 serves as a source of internal funds, mainly because of the fact that the company relying on its own internally generated funds to start The Company. If the owner did not have this money, he would have to look for other sources of generating the starter PROstředů for the company.
Other applications of internal funds are a situation where an established company is looking for funds with which the production plant can be expanded. If the company took advantage of the funds that it has obtained in itself without the help of external investors or creditors, the company would be able to generate internal funds. One of the methods that society can do is the conversion of its profits into capital sources. If this is the case, business owners would have to lose any form of profit share, which is one of the disadvantages in this type of internal funds.
The company could also participate in the aggressive strategic marketing of its products or services to create greater awareness, include your customer base and then increase their sales. If the company is successful in this effort, the money generated from the sale will be used as a source of internal funds. Would also be withE companies with many assets could decide to sell some to get the money they need. This is not the best form of raising funds internally, but it is still a way of raising funds that does not require dependence on external resources.