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Manging Financial Resources and Decisions - Assignment Example
Finance & Accounting
Pages 5 (1255 words)
Managing Financial Resources and Decisions Managing Financial Resources and Decisions PART A- 1. The decision regarding choosing the suitable source of finance depends upon various factors like the need for which funds are required, the duration, purpose and cost of the source of finance…
(NEEDHAM. 1995) Cost of Sources of Finance: Each source of finance has its cost which is an important factor to consider in choosing the source of finance. Equity capital as a source of finance, through ordinary and preference shares has a cost of share in the company’s holding and dividend payments have to be made to the shareholders. Retained profits as a source of finance potentially involve no cost to the company. Debentures are another important source of finance which has interest payments to be made to the debenture holders. Bank finance and overdraft facility by the banks also involves payment of interest to the banks. On the other hand specific assets can be funded by hire purchase and leasing which will involves rental payments to the lessor. The company can also use its trade debtors for short term source of finance which could be done by factoring. This could involve an amount of payment to the factoring company and in some cases loss of reputation as the factoring company may not treat the debtors well. (DRANSFIELD. 2004) PART A- 2. Case I: Mr. Singh needs finance to fund the premises and start up his business. ...
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