Professional Documents
Culture Documents
Lecture outline
Financial needs of small businesses
Sources of funds Control of financial resources Financial lifecycle of a firm Managing finance Stocks
Financial needs
A small business needs finance in a variety of areas.
Permanent capital equity capital Expansion and development Innovation Refinancing Working capital short term finance Debtors/creditors gap Seasonal fluctuations Bridging finance Short lived assets
Asset finance medium to long term finance Plant and machinery Equipment and furniture Building Vehicles International trade finance Growth through international trading
Sources of funds
Internal finance Personal savings Friends and family External finance Debt finance /overdraft bank lending
Personal interviews Evaluation of risks Financial projections/ cash flows and ratios
Export finance
Likely source of finance Financial issues Under capitalization lack of track record which hinder raising finance Lack of Control of costs and information Over t-trading, liquidity crises Equity gap, appropriate information systems Weakening return on investment Finance withdrawn. Tax issues if business is sold
Managing finance
Cash flow, debtors and stocks
Debtors control They absorb cash and increase funding requirements The longer debt is alive, the greater the risk of bad debt The cost of chasing bad debt may be greater than the amount of money being pursued Small firm may not have control system to identify individual debtor problem before they become critical
Stocks
Management of stocks Excessive stocks represent poor investment for a small firms financial resources although running short of stocks can be even more of a problem Stock management is therefore about balance, and the optimization of resources
Discounting
was meant to be taught Wish all of you all the very best in your life and respective professions. I am just a call away if you need any help or assistance at any phase of your life. Good luck for your exams!! Enjoy!