finding the sources_of_finance

Jun 27th, 2015
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Academy of Art University
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Introduction One of the biggest challenges for an entrepreneur while starting new business venture or escalating the existing size is identifying a proper source of finance which will ensure the ultimate goal- wealth maximization. The everyday swells and troughs in the loan-able fund in the capital market make the capital search more challenging like riding a wild roller coaster (Brigham and Houston, 2004). Banks’ reluctance to give loan for less glamorous industry or startup Venture, angel and venture capitalist keenness to established firm are some factors that manipulate the sources as well.

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Lesson-1 on FinanceQuestion: What is Finance?Answer:Mobilization of funds from surplus economic unit & deployment of funds to deficiteconomic unitsQuestion: What is Financial Instrument?Answer:Financial instruments are the financial claim of holder against issuer.Question: What is Cash Flow?Answer:A measure of a company's financial health, equals cash receipts minus cash paymentsover a given period of time.Question: What are the different types of Ratios?Answer:Profitability ratios (Gross Profit Margin, Net profit margin, Operating profit margin,ROA, ROE)Liquidity ratio (Current ratio, Quick ratio)Asset Utilization Ratios (Inventory Turnover, Account Receivable Turnover)Debt Utilization Ratios (Debt to equity, Debt to total assets)Coverage Ratios (Debt Service Coverage ratio, Interest service Coverage Ratio)Question: What is Current Ratio?Answer: An indication of a company's ability to meet short-term debt obligations; the higherthe ratio, the more liquid the company is. It is calculated as:Current Ratio = Total Current Assets/Total Current Liabilities In general, a Current ratio of2 : 1 is accepted by most creditors.Question: What is Quick Ratio?Answer: A measure of a company's liquidity and ability to meet its obligations. Quick ratio,often referred to as acid-test ratio,Acid-Test (Quick) Ratio = ( Total Current Assets Stock)/ Total Current LiabilitiesIn general, a quick ratio of 1 or more is accepted by most credit

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