Aquiring and using funds to maximize value - Assignment Example

Acquiring and using Funds to maximize Value Question One The Budget Item Cash Allocation Rent 650 Car payment 400 Insurance80Student Loan240Utilities270Groceries30Clothing80Entertainment50Miscellaneous Expenses100Savings1000 Total Cash2900 Adjustment for economic downfall at 20%= (2,900 -20/100 x 2, 900)= Ksh. 2320To accommodate the 20% fall I will adjust my budget in the following percentage. I will cut my savings by 50%, Miscellaneous expenses by 40%, cut clothing expenses by 40% and finally cut my groceries at 26.

67%Question Two$ 1000 received today will always be greater than $ 1000 thousand received to tomorrow because available cash can always be re-invested by a firm in a profit generating venture. It illustrate the concept of time value of money. The concept is very important to firms in that a firm can assign a rewarding interest on their cash flow to avoid wastage of funds.Question ThreeEquity financing can simply be defined as sale of a claim of a firm with an aim of raising funds to service its operations (p 27).

Sources of equity financing includes government, private investors, other firms, business partners, financial markets and employees.Advantages of Equity Financing1. It is a source of funds that can help firms keep up with cost associated with their daily operation.2. It is a source of capital that has not condition to repayment by a firm3. It does not contain restrictions on the company’s activities.Disadvantages of Equity Financing1. The process of raising equity financing is usually costly and demanding.

It thus time consuming.2. It can lead to loss of power of controlling decisions of the business by the proprietor.3. Equity financing forces a firm to invest a lot of management time to provide regular information for the investor to monitor.Works CitedBurns, Emile. Modern Finance. London: H. Milford, Oxford UP, 2013. Print.