Exotic Flowers Ltd - Coursework Example

The negative cash flows at the end of each month are a worrying sign for any business but these can be financed by either some short-term financing or long-term financing method. The short-term financing method would include the small bank loans such as overdraft facilities offered by the banking institutions to its clients on a regular basis. Through the overdraft facility, the bank offers some amount to its client and that amount has to be paid off by the client within a short span of time usually 12 months.

The long-term financing would include a loan which would be repayable after a long period of time usually 10 years or more but this sort of long term financing would cost more because the banks or the financial institutions would charge higher interest for a longer period of time. The best suitable financing mode for Exotic Flowers Ltd would be to use short term financing facilities such as overdraft facility that would hold little interest charge and the company would be able to repay it as soon as they end up having a positive cash flow.

Based on the cash flow results, Adam and Tom should continue with the proposed plan of starting Exotic Flowers Ltd even though the business gives a negative cash flow in the opening year of the business. The business turns into a profitable venture in the second year of operation and the profits are considered to grow at a good rate. This growth in the profit and the revenue suggests that the market for the flower business is a very profitable and growing market and until and unless any stiff competition is faced, the company would grow extensively.

The negative balances in the opening year of the business operation and the first month of the second year would have to be financed through short term