There are several ways a business can obtain needed financing. One way is to get loans from banks or investors. Another is to sell partial ownership in the company in the form of stocks. While yet another ways is to license the use of a product or technology. A management decision needs to be made as to which form of financing best suits the firm and product. Once the decision is made the possible pros and cons should be analyzed as well as alterative to the chosen financial decision. Funding being the most important and necessary part of starting a new business, the use of financial management is imperative. An investment banker would be very beneficial in the planning of our firms financial growth and sustainability.
Funding for New Firm
A management decision concerning how to fund our new firm needs to be made. We will first be going through some key financial terms and giving definitions and descriptions of the particular term. We will then identify our preferred source of funding based off of the information available. A description for why a particular form of funding will be supplied. We will go through all the pros and cons of the funding choice we will be going with. Finally, an alternant source of funding will also be identified.
Let us first identify the term investment banker. This individual can be of great importance to the new firm, particularly after the transition from a partnership to a corporation. The investment banker will handles the selling of our company stock and offer financial strategies as our company grows. The investment banker will help develop financial plans and most importantly, be instrumental in implementing them.(The Princeton Review, n.d.)
The second term we must identify is...
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... firm, there can be other options as a means to obtain the needed financing. If there were the needed initial interest in the firm and the product from startup, them it would be theoretically possible to startup as a corporation allowing stocks to be sold as a means to obtain the financing. The same could be true for product licensing, but it has already been established that it will take some time to establish the usefulness of our product in other applications.
Works Cited
AON. (n.d.). http://www.aon.com/ireland/risk-services/risk-finance.jsp
Economy Watch. (n.d.). http://www.economywatch.com/finance/financial-management.html
Marshall, B. (2000). How Stocks and the Stock Market Work. Retrieved from http://money.howstuffworks.com/personal-finance/financial-planning/stock2.htm#
The Princeton Review. (n.d.). http://www.princetonreview.com/Careers.aspx?cid=84
When determining whether to merge or partnership with another hospital is a beneficial choice, one will need to review financial information to make an informed decision. According to Cleverly, Cleverly, and Song in order to make effective decision it requires adequate knowledge and interpretation of financial information. Understanding the accounting processes of business decisions results in effective operational decisions (2012). Some of the financial statements that are used to make these decisions are income, itemized, balance statements, net assets, and cash flow.
... middle of paper ... ... 1. What is the difference between a. and a. What are MCI's needs for future external funds likely to be?
Overview of the organizations financial performance and its ability to invest in establishing a new unit will enable the ...
In this case analysis I will first show the requirements the company had for its financing. Then I will
There is a range of criteria relevant for a decision of financing a new venture. To construct my list for the evaluation of a new company as an opportunity I have selected to refer to t...
Debt financing has both advantages and disadvantages. Debt financing is a business’ way to start up, expand, or recover by borrowing money from a preson or company. The money borrowed has to be paid back along with the interest that was accrued during the length of time the loan was carried out. This option is great for company’s that do not want investors. Debt financing is beneficial because the loaners do not often get involved with the company or any decision making within the company. The downfall is the risk that is assumed with the debt which is, the company may not be able to pay back the loaner. In that case, the loaner would go after the owner or partner personally. There are many forms of debt a company is allowed to take on, such as ‘venture’ debt, even if they are a high-risk corporation. ‘Venture’ debt is a form of senior debt ...
Adelman, P. J., & Marks, A. M. (2010). Entrepreneurial finance. (5 ed.). Bedford, Texas: Prentice Hall.
...he options, the angel round option seems to fit best. The angel investor deal would require 6 months to get capital injection that would be needed to sustain operations until a partnership deal is put in place. I believe this is a good option because there is a 95% chance of forming a partnership within the next two years. With this $2 million injection Purinex will be able to survive until a deal is executed. In addition, I feel like the angel round option is the best alternative because the firms valuation will be much higher than the venture capital round option. Furthermore, there isn’t as many controls or restrictions compared to the venture capital round option. I believe its better than the “wait six months option” because I feel like the “wait six months option” is too risky. Receiving just $2 million from angel investors gives Purinex a little more leeway.
Borrow long-term loans from local banks – These are a common way of financing major purchases of an organization. An advantage is that it is directly linked to an organizations operating capacity. Another advantage of long-term loans from local banks is that it enables a firm engage in large projects. Although its disadvantage is that the banks charge high interest rates.
Research on the Sources of Finance for a Business Firms sometimes need to raise finance for Working Capital and Capital Expenditure. Explain what each is and give examples. · Working Capital (or Revenue Expenditure) The working capital is made up of the current assets net of the current liabilities. It is vital to a business to have sufficient working capital to meet all its requirements. Many businesses have gone under, not because they were unprofitable, but because they suffered from shortages of working capital.
Smaller companies are much more likely to obtain an attentive audience with a commercial loan officer after the start-up phase has been completed. In determining whether to extend debt financing--essentially, make a loan--bankers look first at general credit rating, collateral and your ability to repay. Bankers also closely examine the nature of your business, your management team, competition, industry trends and the way you plan to use the proceeds. A well-drafted loan proposal and business plan will go a long way in demonstrating your company's creditworthiness to the prospective lender.
The intensely competitive, action-oriented, profit-hungry world of investment banking can seem like a bigger-than-life place where deals are done and fortunes are made. Investment bank includes but is not limited to bringing an established company to the market, by that I mean taking company with the capabilities but not capital of expanding, and raising money through other investors or the stock market (IPO) for a commission, I chose this field because of my personal experience with my father and his company, I’ve seen him go from starting off as a cold calling broker, to running a brokerage firm, to starting a brokerage firm, all the way to having his own investment firm. I feel like I would do better with jobs where you set your own hours and work at your own pace. A lot of the work is commission based so the more your work the more you make, this would also benefit me because it would drive me to work more, money is my motivation. To be hired you will need good people and communication skills, highly analytical skills, high ability to synthesize and high creative ability. You will also need experience in modeling, valuing companies, and financial accounting.
Some decisions prove to be vital and any miscalculation that may be involved may prove dire for the individual or the organization. In identifying the criterion to use while evaluating different decisions, many factors pertaining the structure should be considered. The pros and cons of every decision made should be evaluated to ensure that the option chosen has the most positive effect on the individual and the organization. Some of the activities that may require keen decision making include project development, finance and operations. With the knowledge attained it will be easier to cope with tough decisions that may come up in my career. Decision making models may be generated to give an in depth view to the problem and also provide critical analysis ability. It is also vital noting that for those in managerial positions, they face a bigger task in decision making. A good understanding of the business function and structure will provide an in depth knowhow to those that have studied the
Sources of finance are the different methods for a business to earn and obtain money. There are lots of ways to obtain money but two large basic sources of finance, which are the “owner’s capital” and “capital borrowed”. They are also called internal sources of finance and external sources of finance. In those sources, they are mainly divided in two groups, which are short-term sources of finance and long-term sources of finance.
Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures.