Source of Finance Essay

Words: 3106
Pages: 13

Table of Contents
I, INTRODUCTION:
II, TASK: TASK 1:
1. Identify and describe the various sources of finance 1.1 Internal source 1.2 External sources
2. Assess the implication of the difference sources of finance related to risk, legal, financial and dilution of control and bankruptcy 2.1 Issue debt 2.2 Issue equity
3. Select appropriate sources of finance and make recommendations on the best ways of raising finance TASK 2:
Part 1: Assess and compare various costs involve with each source of finance to Vale filters Limited
Part 2: Prepare cash budget for Vale filters Ltd. And discuss the importance of financial planning 2.1 The importance of financial planning 2, Prepare cash budget
III, APPENDIX
IV, REFERENCE
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- Franchising: is the method that franchisor -successful business- grow by giving the franchisees right to use its name. The franchisor also help the franchisees and get profit through license fees and percentage of franchisees’ profit.

Part 2: Assess the implication of the difference sources of finance related to risk, legal, financial and dilution of control and bankruptcy: The different sources which have been mentioned above can be divided into two types of financing based on the implication of each sources: +Issue debt +Issue equity

1, Issue debt: -Legal implication and bankruptcy: There are some obligations that company must follow when issue debt. First, company have to repay all money on or before fixed time that is agreed by both company and creditors. Moreover, company have to pay interest periodically. Almost kinds of issuing debt, such as bank loans or bonds, require business mortgages which are often fixed assets. When company can’t pay off the loan, creditors have right to take over the business mortgages. - Control implication: When issuing debts, debt’ owners only have right with the loans, they can’t interfere in the operation or control of business. Therefore, issuing debt don’t make dilution of control.
- Risk implication: Issuing debts go along with higher risk than issuing equity. The more debts business take the higher risk from payable interest they can meet. Moreover, issuing debt affect directly on profit of company by