Académique Documents
Professionnel Documents
Culture Documents
Sources of Finance
Internal
Personnel Savings
Retained Profit
Working Capital
Sale of Assets
External
Ownership Capital
Ordinary Shares
Preference Shares
Debentures
Other loans
Over drafts
Hire purchases
Lines of credit from creditors
Grants
Factoring
Venture capital
Leasing
Personnel Savings
If an individual uses his/her own money
Easy
Quick
Least risk
Retained profit
The accumulated portion of the profit
which not distributed among the share
holders or owners
Easy
Quick
Least risk
Working capital
Working capital = current assets - current
liabilities
Sale of an asset
Conversion of fixed asset in to cash
Preference shares
Form of right to its owner to share in the
profits of the company (dividends)
The dividend is fixed even under poor
performance
No voting right
Debentures
A note given by the firm to a barer
promising a certain amount of money in an
agreed pattern
Other loans
A fixed amount with a fixed repayment
schedule
May appear on a balance sheet with a
specific name with main details.
Over drafts
Short term loan obtained by keeping the
bank balance as a security
Hire purchases
agreement allows the hire purchaser
sole use of an asset for a period for a
small or nominal amount
Grants
Factoring
Raise finance based on the value of your
outstanding invoices
Venture capital
Capital contributed at an early stage in
the development of a new enterprise,
which may have a significant chance of
failure but also a significant chance of
providing above average returns and
especially where the provider of the
capital expects to have some influence
over the direction of the enterprise
Leasing
Contract between the leasing company
(the lessor) and the customer (the lessee)
More on Shares
The memorandum of association of a
limited company states the amount of
authorized or nominal share capital.
It also says how the share capital is
divided into individual shares of a set
amount, such as 10p a share.
Private Limited No lower or upper
limits
Public limited have a minimum level
Market efficiency
Weak form
Semi strong form
Strong form
Cost of
Financial
distress
Total
Value
Gain from
leverage
Amount of
Debt
Legal Status
Time period
The source can be different according to the
time period
Ex/ short term over draft, long term - shares
Discussion
Scenario 1:
Biz Training Ltd. is considering buying a
new online learning system to enable
them to deliver the training they do for
their corporate clients. They are looking
at three different systems and the cost
of each system is as follows:
System
Cost
120,000
100,000
85,000
Scenario 2:
Biz Training is contemplating relocating to
new premises. Two possible sites are
available with slightly different features
and aspects. The re-location will help
them to be able to meet clients' needs
more effectively.
Location A:
Investment required for the move = 10
million
Location B:
Investment required for the move = 8 million