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Managing Financial Resoures and Decisions 4. Answer 13 questions.No more than 2500 words allowed - Assignment Example

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Managing Financial Resoures and Decisions 4. Answer 13 questions.No more than 2500 words allowed

Issuing Equity is another smart option that can be used by the company. This involves issuing shares to investors at a price determined by the company and using them to raise finance for the equipment needed by the scientists
Lease is when the other company or financing organization buys the equipment and let our company use it against monthly charges known as rentals. The benefit of this option is that the company will not have to bear the entire cost of equipment upfront and in case the company does not need equipment in the future it won’t have to pay the rental and will not have to invest huge amount into buying the product.
Hire-Purchase is like a loan to the company. The difference here is that instead of lending you the money, the bank or other financial institution buys you an asset and charges a mark-up against this assets which is amortized by the monthly payments which includes payment of both principal and the mark-up. ...
vidends are only paid in the profitable years, whereas in case of loans, lease and hire purchase interest has to be paid every period regardless of the fact the company makes a profit or loss. Hence obtaining credit loans, lease and hire purchase is burden on the company’s resources as creditors have a right to sell of company’s assets if they are not paid. Keeping in mind the company is young and does not have enough resources or plowed back profits, it is the best option for the company to raise finance by issuing equity. However, the company should make sure that it floats as much shares in the market so as they will not lose the control of the business or not third party investors will be able to collude to form a holding company. 1c) There will be a different set of requirements and documents that different funds providers will ask from the company before expending them a loan. Banks would ask for collateral and a business plan before deciding on whether it would lend the company or not. Bank would also ask for projected cash flows and income statement in order to make sure that the funds that the bank is obtaining are yielding the required return in order to pay the bank. Similarly, a bank would also ask for the balance sheet to make sure that in the event of default, the company has enough assets and the bank could sell them to recover its lending. Equity investors would want a prospectus which will have to be published in the newspaper. Other than equity investors would be interested in knowing the future plans of the company, the growth rate and name of directors and people running the company. Leasing company would need to know how long the company intends to use the assets, what will be the cash flow generation of the assets and what are the resources ...Show more

Summary

The collateral in this case will be the equipment itself. In other words, if the company fails to clear of its loan and interest, the bank will have the option of selling the equipment that was brought against loan in the open market. This process is called hypothecation and saves the bank against the risk of default…
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Managing Financial Resoures and Decisions 4. Answer 13 questions.No more than 2500 words allowed essay example
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