FINANCIAL RESOURCES

Managing Financial Resources and Decisions

Managing Financial Resources and Decisions

Introduction

In this assignment I will identify the sources of finance available to a small business start-up, a large business wishing to expand and small group of people who are looking to buy up an existing medium-sized company. I will cover the following areas: Assess the implications of the different sources; Evaluate appropriate sources of finance for a business project. Analyse the costs of different sources of finance; Explain the importance of financial planning; Assess the information needs of different decision makers; Explain the impact of finance on the financial statements.

Financing is a very vital part of any business organization. Financing maybe required at any point in time for the business to perform well. Not only is a start up capital important but in order to meet the day to day running costs financing is required. Financing also provides for a business to expand further. However there are many possible sources of financing available to a business, it has to be chosen wisely as the most suitable form of financing varies from the nature of business to business. Larger organisations often have more sources of financing available to them when compared with smaller companies (Petersen, Rajan 1994).

Task 1.1

A small business start-up - Sole trader

A sole trader is an individual who owns and operates his or her own business. Although there may be one or two employees, this person makes the final decision about running of the business. A sole trader is the only one who benefits financially from profits, but must face the burden of any failure.

When it comes to smaller companies they have limited sources of financing available to them. One of the most common sources of financing I would recommend for a small business is to start up is Owner's savings. This is the money put into business by the owner. For new businesses, this is the most likely source of finance. Many businesses are started with individual savings. This money has the advantage that has no interest charges. The money is also at risk. If the business fails the money is likely to be lost. Another option includes borrowing money from family and friends. One of the other feasible options which is available to entrepreneur wanting to set up their own small scale business is to apply for bank loans and mortgages (Benson 2011). It is suitable for starting up a small to medium sized company but some sort of property or asset are withheld by the loan issuing institution in return as a measure of security for the loan. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...