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P4 describe sources of internal and external finance for a selected business
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P4 Describe sources of internal and external finance for a selected organizationTanzania Portland Cement Public Limited Company (TPC PLC) which is the largest cement company in
Tanzania under parent organization HiedelbergCement. TPC PLC was initiated in the year 1966 and is the
first ever cement manufacturing company in Tanzania. For this report I obtained a 2007 annual report
with balance sheets, income statements and other valuable data that has helped me in describing Twiga
Cements financial sources. (2007AnnualReport)
Financial sources are the sources a business relies on to fund the business and keep it on its feet. There
are external sources and internal sources that a business may rely on for funding for this report I will be
explaining five sources of finance used by Twiga cement. All attachments are at the end of the report.
Internal sources
These are the financial sources that come from within the organization itself, it can be from profit re-
invested back into the company (capital from profits) or the owners savings that they decide to use to
fund their business although owners savings are usually used for newer businesses as banks aren’t
willing to take the risk of investing on them.
Retained earnings
These are the earnings a business preserves or keeps from the profit remaining after it has been given to
shareholders and dividends. The money is kept for future purposes or for future dividends. Retaining
earnings is important as it can always come in handy as backup when the business is experiencing major
loss or a lot of impairment asset issues, but most of the times it is used for expansion projects that can
lead to even greater profits for the business. TPC PLC had retained earnings of 75,291,771,000 TZS in
2007 this is a lot more than the year 2006 which had a retained earnings of 50,218,031,000 TZS, the
increase will be beneficial as the organization had decided to establish a new production line and since
the retained earning had a positive rise than there is space for more investing to the expansion projects,
(due to increasing profit which increased by 10611549000 TZS from 2006 to 2007 due to higher sales
volume and better prices); the new production line is believed to become a great expansion project that
will keep TPC PLC on top of Tanzania’s Cement manufacturing market. The expansion project was
approved in 2007 and the new production line will consist of more and new equipments of the latest
technology. The use of retained earnings to be invested back into the organization may come as
beneficial and lead to even greater profits as the expansion project will lead to more production
(because of new equipments such as the new kiln that is able to produce 2,500 metric tons per day of
clinker that is part of the new production line).
External sources
These are the financial sources that come from outside of an organization that are used to fund the
organization.
Loans
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