Basic finance terms that every entrepreneur should fully understand

May 28th, 2015
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Raising funds through Equity: Public Limited Company normally prefers raising of funds through equity because of the following reasons: (i) Funds raised through Equity represent permanent capital there is no liability for repayment. (ii) It is up to the company to pay dividend or not. Thus it does not involve any fixed obligation. (iii) It enhances the creditworthiness of the company. Larger the capital base, higher the ability of the company to obtain credit.

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For any Company finance is just like a blood in a human being. Without availability of proper funds a company cannot run smoothly even for a single day. Therefore to manage funds effectively and efficiently is very important. Every decision with regard to finance should be taken in a very professional manner. Actually it is team efforts and thus coordination is very important. While making finance planning following points should be considered: -1. What is profit margin of the company? Whether it is appropriate enough to bear the burden of cost of capital i.e. Interest and other incidental expenses.2. If the margin is not appropriate then how we can reduce the cost.3. Explore the possibility of reducing the inventory holding cost and collection period. Normally a large part of funds blocked in dead inventory and debtors.4. How we can improve the efficiency of the use of fixed assets. e.g. new technology may be adopted to increase the efficiency of plant and machinery. 5. Company should explore what is the best option for raising the funds. Following are the options available: - Raising funds through Equity: Public Limited Company normally prefers raising of funds through equity because of the following reasons:(i) Funds raised through Equity represent permanent capital there is no liability for repayment.(ii) It is up to the company to pay dividend or not. Thus it does not involve any fixed obligation. (iii) It enhances the creditworthiness of the company. La

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