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Managing Financial Decisions Case Study - sources of finance

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Introduction

´╗┐Managing Financial Resources and Decisions Name: Gulya Aslanova Subject: Raising Funds; Recommendations Tutor: Rolland Date Submitted: 1st October 2012 Raising Funds Summary Jacinda has faced the problem of acquisition of motorcycles and bicycles for her business. She would like to get an advice on the appropriate way of financing the purchase of two motorbikes and two bicycles. What source of finance are most appropriate for her needs and why? I conducted the following research, and the results are given below, along with my recommendations. Background Jacinda owns a sandwich bar that also delivers snacks to local offices and shops. The business has been successful and because of excellent service offered as well as the good quality of food, there has been an increased demand for the delivery service. Jacinda would like to increase the number of motorbikes and bicycles used to deliver the food to the offices in the city centre. Main Body As you can see from reading above, Jacinda need advice how to do it in this situation. ...read more.

Middle

15 days later the credit card statement is sent in the post and the balance is paid by the business within the credit-free period. The effect is that the business gets access to a free credit period of around 30-45 days! Now I would like to inform Jacinda about External Sources of Finance. The 1st option for the External Sources of Finance could be - A bank loan which provides a longer-term kind of finance, with the bank stating the fixed period over which the loan is provided (e.g. 5 years), the rate of interest and the timing and amount of repayments. Bank loans are good for financing investment in fixed assets and are generally at a lower rate of interest that a bank overdraft. However, they don?t provide much flexibility. The 2nd one Jacinda can use her External Sources of Finance is - Bank Overdraft. It is a more short-term kind of finance. ...read more.

Conclusion

So Yacinda can purchase for motorcycles and bicycles partly from her Personal/Self Sources plus using one of her bank facilities ? Overdraft or Loan. For the 5th External Sources of Finance option Yacinda can use Credit from Suppliers. Many invoices have payment terms of 30 days or longer. A company can take the maximum amount of time to pay and use the money in the interim period to finance other things. This method should be treated with caution to ensure that the invoice is still paid on time or else the firm might risk upsetting the supplier and jeopardise the future working relationship and terms of business. You can also call this as a careful balancing act of cash-flow. Conclusion Summarize the fact that whether I were Jacinda, I would use both ? Internal and External option of Finance for my own business. In a conclusion it would be desirable to add that conducting researches I provided to Yasinda every possible ways of financing of her purchases. So she can choose more appropriate way of finance from all mentioned above sources for her business. ...read more.

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