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Financial Management and Analysis - Assignment Example
Before embarking on sourcing for money to fund a project, a corporation like Biz Systems Consultants Ltd needs to look into the different types of finance in relation to the following underlying facts. They include;
The required amount of capital – some sources of capital may…
Their urgency to get the capital required – the more time a company spends while trying to come up with the capital required, the lesser the cost incurred by the company. It would however, have to incur a higher cost if it needed the money very quickly. In the case, the owners of Biz Systems Consultants Ltd need to embrace the likelihood of incurring a higher cost to get the funds needed
The least expensive option – the company should determine the cost of finance in regards to the amount of money it will need to part with in order to secure the amount requested. The company has to decrease the typical cost (interest) by looking for a source of money that offers the least interest rate on the borrowed amount.
The level of risk involved in the investment project – in the case of mutually exclusive projects, the company has to evaluate the projects to determine the project with the best chance of leading to a profit. The owners of Biz Systems Consultants Ltd need to realize that their potential sources of finance will require some sort of guarantee that their return on investment.
How long the company needs the capital - a serious company should identify whether the capital required is for a long or short-term project. Biz Systems Consultants Ltd has a project that is both long and short term and therefore the project management team needs to decide the sources of finance that will be most appropriate for their project. (Crundwell,2008).
There are three popular decision making techniques: The first one is the Net Present Value, the second one is the internal rate of return and lastly, the payback Period technique. There however are, variations of these three most popular bring rise to the existence many lesser-used techniques.
A company like Biz Systems Consultants Ltd has several projects and should measure each ones potential in relation to these three principles in order to make a comparison and choose the best ...