About this resource This Accounting essay was submitted to us by a student in order to help you with your studies. A new company is looking for start up capital.
There is an expiry date by which the company have to pay back the borrowed amount. If a company wanted to buy new uniforms for a sports team then they should consider the trade credit source of finance because it is an interest free way of raising finance however, the company need to be careful when paying back the bill because the cost can increase and it can also result in poor business relations with suppliers.
The company should consider taking loan capital from debentures. The business has insufficient funds in its bank account. Usually, the maintenance and repair costs are not the responsibility of the user and large sums of money will not be needed.
It is important to choose an appropriate and cheap source of finance for the smooth operation of the firm. To start with, have a look at the diagram below; in which we can see a mapping of finance for a business — whatever, its size, shape or sector, all businesses will need to consider some, if not all, of these sources: If the issued shares market price is greater than the nominal value of the share then share premiumis also increased in the balance sheet.
Lenders will be looking for a return on investment, the size of the risk and the flexibility with which they can get their money back when they want or need it. These may be considered a little more flexible than debenture loans.
Bear in mind management can change depreciation policy and showing less profit. Any events after balance sheet date should in the notes and if any mistake or error is found before issuing the F.
Loan from banks Andy can obtain loan from his bank by providing well-kept and accurate financial statement and reports to the bank. A salesman is paying for flights and accommodation for an overseas sales trip. There may be surplus fixed assets, such as buildings and machinery that could be sold to generate money for new areas.
Balance sheets are based on a fix point called a reporting period Income statements show the revenue earned during a reporting period. This must be weighed up against the benefit gained in maximising cash flow, a reduction in the time spent chasing payments and access to a more sophisticated credit control system.
The format of the FS is being standardize like international papers for acca. He however, needs to consider the cost of borrowing that is, the interest rate.
This is by selling them shares in his business. They reveal whether or not cash was generated by the business. This source is most often used in the early stages of developing a new business.
Included in this report are the expenses and cost of creating the revenue. If the company delays the payment of bills than it could result in poor business relations, which could cause suppliers to avoid working with that particular company. Further reading … The following website offers a very comprehensive overview of all sorts of business finance — why not, have a surf through its pages, to learn more about how, business finance is raised, managed and secured.
The financial statement shoud be reliable, understandable,comparable and relevant. These are creditors of the company but not the owner.Sources of Finance Essay Sample. For the following items below, decide which form of external finance is suitable and why?
(You may have to decide between more than one, evaluate the best solution). The Different Sources Of Finance And There Implications Finance Essay Published: November 27, The assignment attempts to explore the different sources of finance and its implicationIt describes how different structures and cultures affect the business performance of the organization.
Sources of Finance. Finance is essential for a business’s, development and expansion.
Finance is the core factor for most businesses and therefore it is crucial for businesses tomanage and maintain their financial resources better.
* Types of finance * Internal sources of finance * External sources of finance * Factors to be considered when choosing sources of finance Sources of finance Finance: Finance is the study of how investors allocate their assets over time under conditions of certainty and uncertainty.
Finance: Finance is the study of how investors allocate their assets over time under conditions of certainty and uncertainty. A key point in finance, which affects decisions, is the time value of money, which states that a unit of currency today is worth more than the same unit of currency tomorrow.
Free Essay: Sources of Finance for a Business For a business to successfully run, it must have sources of finance. These are methods of financing the running.Download