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Sources of finance - Essay Example

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Sources of finance

As you grow, you may need to turn to alternate sources such as Venture Capital. Once you have achieved a financial track record, you can turn to other sources such as Asset Based Lending or Commercial Loans. The main sources of financing can be divided into:
Roger Inman can use cash for his purchase of new computer or the following sources of financing, such as a small loan(notes payable), buy a computer on accounts payable (in this case computer company would have to finance the purchase). Or another solution would be to lease a computer.
A firm can raise money for working capital by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid.
First of all it is difficult to answer, because we do not know in which industry the company is, therefore we can not say what the optimal capital structure is. So, making a few assumptions, next sources of financing can be used:
E) Euro Tunnel suffered trading losses in its first year of operation. If the company wanted to maintain its gearing ratio at the same level as previous year, what type of finance would it have to raise
As the company is suffering losses it implies that retained earnings are going down, resulting in equity decrease, so the gearing rate is going up. In order to keep the leverage rate at the level of previous year, new issues should be issued in order to counterbalance the losses that a company is currently making.
F) Carlton Holdings PLC has a ...Show more

Summary

a) Assess the cost of different types of finance for the business. The capital structure can maximize the value of the company as well as destroy it, if chosen wrong, so close attention should be paid to cost of financing. Usually equity financing makes companies WACC higher and therefore profit lower, meanwhile financing with the help of debt provides tax shied and decrease WACC, therefore resulting into higher value of the company.
Author : walkerbode
Sources of finance essay example
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