Essay about Notes On Sources Of Finance

Essay about Notes On Sources Of Finance

Length: 1002 words (2.9 double-spaced pages)

Rating: Better Essays

Open Document

Essay Preview

Sources of finance
There are different sources of finance such as debt, retained earnings, term loans, working capital loans, equity, letter of credit, debentures, euro issue, venture funding etc. These sources are useful in different situations. They are classified based on time period, ownership and control, and their source of generation.

-Debt Factoring
Debt factoring is a financial arrangement by which a business sells its invoices to a third party at a discount. Businesses use debt factoring to improve their cashflow.

Releases immediate cash:
First and foremost, a debt factoring plan means that the business which delivered the goods or services receives the actual funds claimed with the invoiced almost immediately, regardless of the capacity of the end client to pay for the bill. Funds can be used to carry any necessary business operation instantly.

Saves time and resources
With a factoring plan, a company no longer needs to spend time and divert resources to the tedious, unpleasant and time-consuming tasks of invoice claiming and payment collection. Also, the cost of the factoring service may not be as high as one thinks, as the competition in this sector is quite frantic.

Frees ongoing working capital
Businesses which use factoring enjoy more flexibility. Direct access to invoiced funds make it possible to repay bank facilities and release previously pledged security.

Brings total peace of mind
If the factoring service plan includes bad debt protection (known as non-recourse factoring) that is, a true credit option, businesses will not even need to worry about their clients honouring their debts at all.

Loss of profit
It should be kept in mind that a debt factoring service comes at a price : usually, a perce...


... middle of paper ...


...er 's payment to a seller will be received on time and for the correct amount.

The terms of a letter of credit can specify that fax presentments are allowed and that the draw must be honored (or notice of dishonor given) within a few days or less.

By use of a letter of credit, the beneficiary is assured that the payment obligation is backed by credit of a bank which is substituted for or added to the credit of a corporate or individual applicant.

Standby LC 's are treated by issuers like loans – the applicant must be credit approved, set aside credit lines and frequently has to set aside collateral to secure its duty to reimburse the issuer if there is a draw on the LC.

Other forms of credit support may be less costly, such as a bond, export credit insurance, documentary collection, open account sales, a security interest in collateral, or a corporate guaranty.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Sources Of Finance For A New Business Essay

- There are two main sources of finance for a new business. These are loan/debt capital and equity financing. These are very helpful sources especially for a young growing business. The management hence has to research on the appropriate source that fits the particular business they are in. these sources are explained below in detail;- SOURCES OF FINANCE Equity capital This is invested money that, in contrast to debt capital, is no repaid to the investors in the normal cause of business. It’s the risk capital staked by the owners through the purchase of the company’s shares (Stock exchange)....   [tags: Debt, Finance, Stock market]

Better Essays
802 words (2.3 pages)

Research on the Sources of Finance for a Business Essay example

- 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....   [tags: Papers]

Free Essays
700 words (2 pages)

The Three Main Areas of Corporate Finance Essay example

- 1.0 Introduction Finance is a mixture of both economics and accounting. Finance is generally concerned with three main areas which are corporate finance, capital markets and investments. Corporate finance or financial management is related to decisions made by a company which involves what and how much assets should a company attain and secured to maintain the optimum level of performance and maximize the asset's value. Capital Markets refers to the market where the It is very important for the manager of a business to select a suitable source of finance because There are two types of financing, long term and short term to medium term financing....   [tags: capital, invest, banking]

Better Essays
1049 words (3 pages)

Business Anaysis: Assets and Notes Receivable at PesiCo Essay

- Among its current assets, PepsiCo’s accounts and notes receivable to total assets percentage fall down from 9.48% in year 2011 to 7.49% in 2013, due to its receivable period becomes long. In cash cycle, the shorter receivable period, the better. PepsiCo’ inventories to total assets percentage also fall down from 5.25% in year 2011 to 4.40% in year 2013, caused by decreased number of days to sell its inventories. decreased accounts and notes receivable and decreased inventories as percentages of total assets should raise some concerns and thus need to be analyzed further with liquidity ratios and asset utilization ratios to decide whether these are warning signs of the company’s financial hea...   [tags: investment, financial health]

Better Essays
1005 words (2.9 pages)

Notes On Mutual Fund Report Essay

- Khalid Alghammas Fereshteh Lavassani MSE 304 08/14/2015 Mutual Fund Report Abstract This paper is dedicated to the analysis of three mutual funds in order to assess the relative performance of each based on a rate of return before taxes. I have focused on three mutual funds for the analysis in this report: Fidelity Freedom International Capital Appreciation Fund (FIVFX) from the Fidelity Funds, Quaker Small-Cap Value Fund (QUSVX) from the Quaker Funds, and Large Cap Equity Fund (RIMEX) from the Rainier Funds....   [tags: Investment, Stock market, Rate of return]

Better Essays
2136 words (6.1 pages)

Sources Of Finance And Finance Essay

- Sources of finance A few sources of finance are short term and ought to be paid back within a year. Other sources of finance are long term and can be paid back over several years. Internal sources of finance are finances discovered within the business. For example, profits can be reserved back to finance growth. On the other hand, the company can sell items it owns that are no longer required to free up money. External sources of finance are discovered exterior the business, for example from creditors....   [tags: Finance, Economics, Term, Time]

Better Essays
721 words (2.1 pages)

Credit Analysis:The Importance of Financial Statements to Commercial Lenders

- Financial Institutions are an integral component of financing for many companies and industries today. Especially since many companies are not generating the income that was experienced in the past due to a suppressed economy. It is important for companies to keep accurate current financial records. (Lawrence, 1983) These records become an important part of the loan request package that they submit to the lending institution. Financial institutions rely heavily on the audited financial statements of the companies to reach their lending decisions....   [tags: Finance]

Better Essays
2235 words (6.4 pages)

Financial Management Notes Essay

- ROLE OF FINANCIAL MANAGEMENT -     Financial management is one of the functions of management -     Financial management is concerned with o     Profits and losses of operations           o     Control over funds o     Ensuring appropriate cash flow is available o     Chas management o     Raising funds / controlling internal funds o     Investment of funds o     Cost control / pricing o     Forecasting / measuring financial performance against expectations -     Accounting is a subset of financial management....   [tags: GCSE Business Management Studies]

Better Essays
1412 words (4 pages)

Different Sources of Finance for Businesses Essay

- Different Sources of Finance for Businesses Introduction This assignment will look at the different sources of finance that are available to a small business or a big company. With each source of finance listed the report will assess the implications that can arise and along with this the report will look at the cost to the business to taking a curtain source of finance. All businesses need short-term finance from the very beginning to start up the business and to cover day-to-day running costs....   [tags: Papers Business Finance Loans Essays]

Better Essays
4212 words (12 pages)

Essay about Sources of Finance for a Business Start-Up

- Sources of Finance for a Business Start-Up For this task I will be considering the sources of finance I will need for my company. Why might a business require finance. A business may require finance because they can either: • Be setting up a new business and they do not have enough money to start up. • They may need new equipment to help make the business expand and make more profit. • Or they may even want to replace old machinery. • They may want to move there store to a better location that might benefit there company more....   [tags: Business Finance Capital Entrepreneurship]

Free Essays
1480 words (4.2 pages)