My unbiased view of the world Every decision made in a business has financial implications, and any decision that involves the use of money is a corporate financial decision. Defined broadly, everything that a business does fits under the rubric of corporate finance.
Overview Finding the right financing for your business can be a challenging task. However, if you understand a few of the basics when it comes to your financing options, you can reduce the amount of time it takes to find that financial partner and increase your chances of getting the right financing for your business.
Just like any industry there are many different financial resources, each with a different area of focus or specialty. The financial resource that is right for you depends on several factors: In financing, the risk reward trade-off holds true, the greater the risk the financial resource is taking, the greater the return they are expecting to receive from their investment.
Understanding where your company and your financial resource are on the financing spectrum will help you determine if there is a good match between debtor and creditor. Equity One of the first questions you need to ask yourself when determining your capital requirements, are you willing to give up some ownership or control of your company?
If you are, than you may be a candidate for equity financing, if you are not, then you are more likely a candidate for debt financing. In general, with debt financing, there is a clearly defined: However, the financing resource does not have ownership of your company or the ability to directly control the direction of the company.
In general, with equity financing, there are no fixed periodic principle and interest payments, and there are no fixed terms as to when the investment needs to be paid back. However, in return for their investment, you give the investor, an ownership stake in the company, a share of the company profits, and the ability to control the overall direction of the company.
Debt Financing There are many types of debt financing including: They are typically secured by the fixed asset being purchased. Lines of Credit - are typically used for financing working capital needs and are used on as needed basis. They are expected to revolve on a regular basis, that is, you borrow money one month then pay it back with interest the next.
They are generally provided by banks and finance companies and have: They are typically secured by such things as accounts receivable and inventory. Factoring - also used for financing working capital needs, is a financial transaction whereby a business sells its accounts receivable i.
Factoring differs from a bank loan in three main ways.
Secondly, factoring is not a loan, it is the purchase of a financial asset the receivable. Finally, a bank loan involves two parties whereas factoring involves three. Invoices may be factored with or without recourse. In general, this type of debt financing can be provided to new and established businesses.
Purchase order financing is usually provided by finance companies. Equity Financing There are many types of equity financing including public stock and private stock Public Stock - companies that issue public stock have the ability to raise large amounts of capital from a variety of investors all over the world.
A publicly held company is required by the SEC to publicly disclose its financial performance in detail on a quarterly basis.
As with equity financing, their investors, own a portion of the company, share in the company profits and can have control over the company direction by utilizing their voting rights. Private Stock - companies that issue private stock have the ability to raise capital from a limited number of accredited investors in the world.
There stock is not traded on a regular basis on the public exchanges. However, they are regulated by the Securities and Exchange Commission. Unlike a publically held company, a privately held company does not have to disclose its financial performance to the public. Angel Investment - a private equity investment which is generally raised from a small group of accredited investors high net worth individuals.
This group of investors varies dramatically, but could be professionals, business owners or business executives. They could invest on their own or through angel investment groups.
These investors usually invest in early stage companies that have the ability to grow rapidly. In general, these investors concentrate their investments in industries they are familiar with. They may have previously worked in the industry, invested in the industry or owned businesses in the industry.
In general, these investors prefer to exit their investment in approximately 5 years.9 award 2 out of points show correct answer Show correct answer Choose the type of company in each case that best fits the description. a. 2 out of points Show correct answer Read the following passage and choose the appropriate 90%(42).
You do not have investors or partners to answer to and you can make all the decisions. credit standing, business plan, tax situation, the tax situation of your investors, and the type of business you plan to start all have an impact on that decision.
Operating revenue and the sale of assets can also generate money for your firm. Make. Company Information Wheel Industries is considering a three-year expansion project, Project A.
The project requires an - Answered by a verified Business Tutor What are the advantages and disadvantages of using this type of financing for the firm? B. The firm is considering using debt in its capital structure.
Company Information Wheel. A venture capitalist is often a firm, The deal as well as the risk/reward profile will be specific to each party. This type of financing is not appropriate . Get an answer for 'financial managementits a case studies kindly help me out wit the ans in detail 1.
Which type of financing is appropriate to each firm?2. What types of securities must be issued. financial management.
its a case studies kindly help me out wit the ans in detail.
1. Which type of financing is appropriate to each firm? 2. What types of securities must be issued by a firm.