These are sources of finance that come from the business'
assets or activities.
If the business had a successful trading year and made a profit
after paying all its costs, it could use some of that profit to
finance future activities .
This can be a very useful source of long term finance, provided
the business is generating profit (see section on profit & loss
Sale of Assets
The business can finance new activities or pay-off debts by selling
its assets such as property, fixtures & fittings, machinery,
It is often used as a short term source of finance (e.g.
selling a vehicle to pay debts) but could provide more longer term
finance if the assets being sold are very valuable (e.g. land or
If a business wants to use its assets, it may consider sale
and lease-back where it may sell its assets and then rent or
hire it from the business that now owns the assets. It may mean
paying more money in the long run but it can provide cash in the
short term to avoid a crisis.
Stock is a type of asset (see balance sheet work for more on assets)
and can be sold to raise finance. Stock includes the business' holdings
of raw materials (inputs), semi-finished products and also finished
products that it has not yet sold.
Businesses will usually hold some stock. It can be useful if there
is an unexpected increase in demand from customers. Stock levels
tend to rise during economic slowdowns or recessions as goods are
not sold and 'pile-up' instead.
It is not usually a source of large amounts of finance - if a business
has very large stock piles, it might mean that nobody wants to buy
the product and reducing stocks will therefore be hard. It is often
considered to be a short term source.
Unlike you and me, a business does not normally pay for things
before it takes possession of them. Instead, it will usually place
an order for supplies / inputs and will pay after receiving the
items. It is good practice to pay quickly (often within one month)
as this will help the business develop a good relationship with
This source of finance appears on the balance sheet as trade credit.
This method of deferring (delaying) payment to a future date is a
form of very short term borrowing and helps with the problems
of the cash cycle identified in the work on liquidity.