Albizu University Principles of Finance Discussion

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Principles of Finance

Explain the different long-term financing options for businesses Reply to each Peer about their post.

Explain the different long-term financing options for businesses Discussion Reply 1 Georgina:

Explain the different long-term financing options for businesses.

“Businesses obtain long-term financing from internal funds, which are generated from profits, and from external funds, which are obtained from capital markets,” (Melicher & Norton, 2017). Normally companies can take out a long-term cash flow loan to be able to purchase more materials or products to be sold, this will allow for a higher volume of sales during the same sales cycle. Another modern way of raising funds is a peer to peer funding option, this allows for an easier process since a lot of the terms or requirements are not as a traditional financial institution.

What factors influence whether companies fund internally or externally?

The factors influence whether companies fund internally or externally by the availability of funds.

The allocation of resources in different projects in terms of cash flow and cost of the borrowed funds.

Frequency of fund release by business can be a factor of it they use internal funds or funds from a lender.

To run a small doctor’s office that does not have much growth compared to a large hospital with systems that are growing rapidly with the demand for high amounts of capital. The small office will have to find resources that are not necessarily a typical way, as mentioned before there are other means of gaining funds needed. Some way are Angel lenders, private investors, and even personal funding from savings. Short term loans, trade credit, bill discounting and fixed deposits can help although the interest is normally higher, it can be a start as long as there is a good margin of profitability.

References

Finance, I. A. (2013, April 29). henleybusinessreview. Retrieved from Henley Business Review: https://henleybusinessreview.wordpress.com

Melicher, R. W., & Norton, E. A. (2017). Introduction to Finance. Hoboken: John Wiley & Sons, Inc.

Explain the different long-term financing options for businesses Discussion Reply to Kendel:

Hello Class!

This week we take a look into long-term financing which includes things like bank loans, bonds, and different forms of stocks. These concepts also involve time maturity . A bond can be described as a deal made between a lender and a borrower and can usually be seen in business firms and government institutions. Common stocks is what some of us have in companies like Apple, Google, or Nike. It is owning a small portion of a company or corporation. The more stocks you buy the higher the percentage of the company you own.

Stock shares can be used to finance a medical facility or in this case a small doctors office. A good example of this can be seen on the show Shark Tank where people with ideas or small companies come in pitch their product and and in exchange for money they offer a potion of their business to those willing to invest in them. This would work as well for a small doctors office. Say we need $750,000 to get the office up and running. I put in $100,000 of my own money maintaining 51% ownership. That means i have 49% of my company that I can disperse in exchange for money. I personally would split that 49% into four 10% shares and one 9% share. Most medical facilities have a board that they answer to in order to keep integrity high. With that in mind, sine I have chosen stocks as the way to finance my office, I would ensure that my share holders have some sort of medical background that will aid in me running my office to the best of its ability.

The next idea we must look at is internal verses external funding. The concepts are pretty self explanatory, but internal funding is done through the resources and profits from within a corporation. Whereas external funding is done with outside sources like bonds, stocks, and loans.

Melicher, R., & Norton, A. (2017). Introduction to finance: Markets, investments, and financial management (16th ed.). John Wiley & Sons, Inc.

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Excellent resource! Really helped me get the gist of things.

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