finding the sources_of_finance

Jun 27th, 2015
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 What are the uses of money? Before the introduction of money, people traded by bartering. One good was exchanged for another good at constantly fluctuating rates. Bartering often created shortages in an economy. The use of money instead of bartering solved this shortage problem (to an extent). Money is the set of assets in an economy used regularly by people to buy goods and services. The total quantity of money in an economy is the money supply. Similar to money, currency is all the paper bills and coins in an economy held by the public. The following three bullets list the functions of money in an economy:

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Sources of FinanceFinance sources may be internal orexternal, but they may also be short,medium or long term: Short Term: Finance the business for up to1 year. Medium Term: Finance the business for upto 5 years Long term: Finance the business for morethan 5 years.Short, Medium and Long Term FinanceLong TermMediumTermShort TermPersonalSourcesPersonalSourcesPersonalSourcesOrdinary ShareCapitalLoanCapital/BankLoanLoanCapital/BankLoanBank OverdraftVenture CapitalChoosing a Source of Finance Legal Structure PLCs and LTDs can sellshares, Sole Traders and Partnerships cannot The use of the finance large expensivemachinery will require a long term source,paying off an outstanding account will onlyrequire a short term sourceChoosing a Source of Finance The amount required The larger the sum, the lesslikely the owners are to be able to raise the moneyinternally. However, lenders often want to see thatthe borrower is also taking a risk so may be acombination. Profit levels The higher the profits the more moneyto use from internally. A firm with low profits (whichneeds the money the most!) will find externalsources hard to find.Choosing a Source of Finance Level of Risk A risky enterprise will find it harder toraise capital, although venture capital may beavailable. May have to rely on personal sources. Views of the owners May be reluctant to losecontrol of a firm, espe

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