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study material on finance 27

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http://www.bized.co.uk Sources of Finance Copyright 2006 – Biz/ed http://www.bized.co.uk Sources of Finance Copyright 2006 – Biz/ed http://www.bized.co.uk Business Growth Copyright 2006 – Biz/ed http://www.bized.co.uk Internal Sources of Finance and Growth Selling more? Mind the queues. Copyright: iStock.com • ‘Organic growth’ – growth generated through the development and expansion of the business itself. Can be achieved through: • Generating increasing sales – increasing revenue to impact on overall profit levels • Use of retained profit – used to reinvest in the business • Sale of assets – can be a double edged sword – reduces capacity? Copyright 2006 – Biz/ed http://www.bized.co.uk External Sources of Finance • Long Term – may be paid back after many years or not at all! • Short Term – used to cover fluctuations in cash flow • ‘Inorganic Growth’ – growth generated by acquisition The existence of capital markets enable firms to raise long term loans and share capital. Copyright: Photolibrary Group Copyright 2006 – Biz/ed http://www.bized.co.uk Long Term • Shares (Shareholders are part owners of a company) – Ordinary Shares (Equities): • • • • Ordinary shareholders have voting rights Dividend can vary Last to be paid back in event of collapse Share price varies with trade on stock exchange – Preference Shares: • Paid before ordinary shareholders • Fixed rate of return • Cumulative ...
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