Nobody downloaded yet

Understand the Sources of Finance Available to a Business - Essay Example

Comments (0) Cite this document
Summary
Of vital necessity is the availability of finance for capital to start the business. Long term financial needs include the purchase of fixed assets, financing permanent portion of the working capital and for financing the growth and expansion of the business…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94.4% of users find it useful
Understand the Sources of Finance Available to a Business
Read TextPreview

Extract of sample "Understand the Sources of Finance Available to a Business"

Download file to see previous pages Understand the Sources of Finance Available to a Business

In every business, the availability of finances is an inevitable need. These are credits given by suppliers to manufacturers or traders, who pay for the goods after sales. The business, therefore, can acquire goods without paying for them instantly. Trade credits are advantageous since the business makes payment after the expiry of the period given. It is disadvantageous since there is no extension of the arrangement after the expiry period. Commercial banks may grant bank credits to a business, which act a source of business finance. The credit is useful for starting or expanding the business. The possibility of extension of bank credits’ payment period makes it advantageous as a source of business finance. The need for collateral to get bank credits forms one of its disadvantages. Bill discounting is another source of business finance. Banks deduct discounts during payments, equal to the remaining period’s interest. It is advantageous since cash is available immediately to the business. It, however, turns disadvantageous when the business is not credit worthy. It uses the business’ credit-worthiness to grant finance to the business. Customer advances are sources of business finance. These are advance payments made by the customer, mainly on large orders. It is advantageous since it does not need tangible security. ...
It involves paying a small portion of the cost of purchase and settling the balance on installments. This is advantageous because there is delivery of the asset after paying the down payment. Other payments, therefore, comer later and the business has time to acquire finances. It, however, is disadvantageous because the business is under obligation to pay the installments whether it makes losses or have profits. The business constrains to pay the installments, in case of losses. Finance from co-operatives is a source of business finance. They can help in coming up with short-term finance and such loans need little security. They are advantageous because small business can avail them easily. It is disadvantageous since its availability is limited to co-operative members. Issuance of shares is a good source of business finance, mainly for long-term use. A business may issue preference or equity shares. Contrary to equity shares, preference shares have preferential rights. Shares have several merits. It is a reliable source of additional capital. Shareholders are also able to earn dividends from their investments. The demerits of shares may occur when equity shareholders, who have voting rights, take control of the business. This may bring the possibility of conflict of interest that may hinder a company’s smooth functioning. Debentures are loan certificates issued to the public. They are financial source if the business needs a large amount of funds. A business may have redeemable, irredeemable, convertible, or non-convertible debentures. The advantage of debentures as a source of finance for the business is the lack of control overs the business by debenture holders. It is reliable as a source of finance for business. The greatest disadvantage of ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Understand the Sources of Finance Available to a Business Essay”, n.d.)
Understand the Sources of Finance Available to a Business Essay. Retrieved from https://studentshare.org/business/1454096-understand-the-sources-of-finance-available-to-a
(Understand the Sources of Finance Available to a Business Essay)
Understand the Sources of Finance Available to a Business Essay. https://studentshare.org/business/1454096-understand-the-sources-of-finance-available-to-a.
“Understand the Sources of Finance Available to a Business Essay”, n.d. https://studentshare.org/business/1454096-understand-the-sources-of-finance-available-to-a.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Understand the Sources of Finance Available to a Business

Short term finance sources

...? Module Semester Short term finance sources refer to sources that have to be repaid within a year. These are important tools which help in operating the business efficiently. The short term finances also help in making a long term strategy for the business. They can be used to pay for the salaries of the employees and other administrative costs. There are four most common short term sources of finance that a business uses to finance its expenses and they are; 1) Bank overdraft 2) Short term loans 3) Trade credit 4) Sale of unused assets Bank Overdraft: In today’s modern era, every business maintains a bank account of its own where it deposits the money it receives from the sales generated by the business. As the businesses expand... as...
6 Pages(1500 words)Essay

BUSINESS ORGANISATION AND SOURCES OF FUNDING/FINANCE

.... Whether leasing or hire purchase would be suitable methods for acquiring fixed assets would be determined by the fixed assets required, if any, and whether it would cost less to lease the item, purchase the item using hire purchase, purchase the item using other finance or purchasing the item outright using business funds if they are available. It is difficult to recommend this alternative without more detailed information as to the specific asset requirements of the business and whether they would warrant a leasing or hire purchase agreement. There may also be government grants available to help the business expand, although with the...
9 Pages(2250 words)Essay

Sources of Finance

...and Business Angels. Business angels and venture capitalists are considered the riskiest on a risk-capital spectrum. Venture capitalists usually do not engage with SMEs in their early stages. 2. Normal Operations or Growth Phase: At this stage the SME has become organisationally advanced and manufacturing products or providing services. It may be generating positive cash, which becomes internal source of finance. Trade credit, short-term to medium-term loans, bank overdraft, factoring and leasing may be other sources of financing. 3. Stable Growth Phase: Bank loans and venture capital generally are not available until...
12 Pages(3000 words)Essay

Long-Term Sources of Finance

...?Long-Term Sources of Finance Contents Contents 2 Introduction 3 Long-term Finances 3 Sources of Long-term Finance 4 Conclusion 11 References 13 Bibliography 13 Introduction This essay is a detailed analysis of a variety of long-term sources of finance along with their advantages and disadvantages. It also includes the suitability of each source of financing to different firms based on the kind of business stage the firm is in. The long-term finances for a firm are mainly of two types- Equity and Debt. Mainly four sources of long-term...
8 Pages(2000 words)Essay

External Sources of Finance

...? inserts His/her inserts inserts Grade   External sources of finance The selectionof an external source of financing is usually one of the most challenging aspects in the establishment of a business enterprise. Acme is therefore at crossroads to evaluate the various options available and select the best source both in terms of cost and efficiency. In any case, it has to be realized that building a Greenfield investment from scratch is usually more expensive than acquiring an already existing business. Financing decisions are normally very fundamental considerations to be made by any...
4 Pages(1000 words)Essay

Understand the sources of finance

...) sources of finance that participants may choose from. (AC 1.1 Identification the sources of finance available to a business) Trade credit refers to the purchase of goods and services on the basis of credit; this means that the business can purchase the raw materials from its suppliers on credit basis. Business can even ask for a loan from a particular bank if it wants to finance its operations. The business can even save money by obtaining discounts on purchase of raw material by paying money in cash; various suppliers provide discounts to those...
4 Pages(1000 words)Essay

Understand the sources of finance available to a business

...? Understand the sources of finance available to a business Table of Contents Introduction 3 Identifying different sources of finance available to a business 3 Assessment the implications of the different sources 4 Analyse the costs of different sources of finance 6 Evaluation appropriate sources of finance for different business projects 7 Reference 8 Introduction This paper represents training guideline report about understanding the different sources...
5 Pages(1250 words)Assignment

Sources of finance

...MANAGING FINANCIAL RESOURCES HNC BUSINESS Theory: a) Assess the cost of different types of finance for the business. The capital structure can maximize the value of the company as well as destroy it, if chosen wrong, so close attention should be paid to cost of financing. Usually equity financing makes companies WACC higher and therefore profit lower, meanwhile financing with the help of debt provides tax shied and decrease WACC, therefore resulting into higher value of the company. b) As each company needs capital, of course the best way to obtain it is through sales. Sometimes the company is in a need of more immediate...
5 Pages(1250 words)Essay

Identification of the sources of finance available to a medium size business,

...College SOURCES OF FINANCE FOR MEDIUM SIZED COMPANIES Sources of Finance can be broadly ified into two, either as external or internal. External sources include debt finance, equity finance, short term, medium or long term while internal sources are savings and retained earnings. External Sources Short term sources of finance are available for businesses to run their daily operations. They are; 1. Overdrafts 2. Trade Credit 3. Short term Loans 4. Sale & Leaseback Long term sources of...
4 Pages(1000 words)Assignment

Sources of Finance

...Sources of Finance Compare and contrast debt (long-term loans) and equity (shares) as forms of long-term finance. Illustrate your essay with examples. Long-term finance is referred to the category of finances that is provided for more than one year (Finance.mapsofworld.com, 2013). There are several different forms/types of long-term finances, which can be used in various ways by business entities (Finance.mapsofworld.com, 2013). Both long-term loans or debts and equity (shares) are long-term finance sources. However, business entities with limited scales (not...
3 Pages(750 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Understand the Sources of Finance Available to a Business for FREE!

Contact Us