2 PARTS finance

User Generated

Unzorna19

Business Finance

Description

PART ONE

For this part of the course project, you will demonstrate your ability to identify how firms raise funds through the use of debt, equity, and retained earnings.

Your client, SmartClean, Inc., is a cleaning service for office and industrial locations. SmartClean has been in business for 5 years and has shown steady revenue growth each year. The owner originally started the business using a business loan. The owner has $10,000 remaining on the loan after steadily making payments and has an excellent personal and business credit history.

The owner wishes to expand the SmartClean business into three new territories, needs an infusion of capital, and is looking for $50,000 in order to make the expansion.

The expected fixed costs for the current business and expansion is $75,000. SmartClean's average charge per job is $250.00. The variable costs per job is $35.00.

To complete this assignment, write a 5-page, APA formatted proposal that includes the following parts:

  • Summary of client needs
  • Advantages and disadvantages of debt financing
  • Advantages and disadvantages of equity financing
  • Recommendation for a financing strategy for SmartClean
  • Complete breakeven analysis (based on given price analysis and cost)

PART TWO 150+words

Discuss the two common components of a firm's capital structure. Does a firm need both components? If you were a business owner, which component is most important? Why?



User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Hey! See the attached paper. In case of any question you can always get back to me. Looking forward to working with you.

1

Business Financing

Business Financing
(SmartClean Inc.)
Name
Affiliation
Course
Date

2

Business Financing
Introduction
Business owners are faced with the problem of determining the mode of financing that they should
apply in their business especially during expansion. Business financing is an important decision
that every business owner must make and in order to do this, it’s crucial for the business owner to
evaluate the effects of the different modes of financing. Different types of financing come with
different cost and therefore it’s necessary to evaluate the different modes so as to arrive at the most
optimal mode of financing or even the most optimal mix of financing sources. Ideally, different
modes of financing include debt financing, equity financing (both are external sources of funds)
and internal financing through retained earnings. There exists a pecking order in which these types
of financing should be applied, for example, internal financing comes first since its readily
available and cheapest to acquire and when exhausted, debt financing can be used and lastly, equity
financing. Debt financing is considered cheaper than equity financing and it does not lead to
dilution of ownership. (Hovakimian, 2001)
Summary of clients’ needs.
SmartClean has been a successful company given the fact that it has shown steady revenue growth
over the time that it has been in business for the past 5 years. Notably, the company has been able
to service and honor its debt obligation leading to ...


Anonymous
Awesome! Made my life easier.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Similar Content

Related Tags