• thinkigcse.com

 

Factors affecting the choice of finance

With so many sources of finance to choose from, a business has to carefully select the appropriate one. The following points may be considered while selecting the most appropriate source of finance.

Type of expenditure
: Whether the finance is needed for capital expenditure or revenue expenditure. Issue of shares will be more appropriate for limited businesses who want to expand rapidly. If it is a cash flow problem then bank overdraft may be more appropriate.

How long the business needs the finance?

How much amount is needed?

What is the status and size of the business?
A small business might not be able to raise additional capital through issue of shares.

What is the capital composition of the business? Highly geared businesses (i.e. with more debt capital and less equity) would rather go in for equity financing.

What will bank see before lending money?

When applying for loan the bank manager or your creditor might be interested in knowing the status of your business. They will review your

  • Balance sheet: to see how much you own and how much you owe to others.
  • Profit and loss account: to see the profitability of your business.
  • Cash flow forecast: Predictions about how much and from where cash will come in and go out.

Exciting News!

IMPORTANT MESSAGE

Quizzes and worksheets on this website have been developed in Flash format. Flash is no more supported by browsers. Therefore, you might see blank pages on some instances. Install Flash player plugin for Chrome from Chrome Web Store. Click here 

Similarly, for other web browsers you will have to activate the relevant flash player plugins.

JOIN OUR ONLINE COURSES

New Youtube Channel - ThinkIGCSE

Hi Everyone, I have launched a new YouTube channel with more than a 100 videos on  Economics and Business Studies, tailored specifically for IGCSE and A Level and IBDP students.

Subscribe now and join us on this learning journey: @thinkIGCSE

WHO'S ONLINE

We have 173 guests and no members online

MindMaps

PDF FILE

Download

Cheatsheets

PDF FILE

Download

Crosswords

PDF FILE

Download

Save
Cookies user preferences
We use cookies to ensure you to get the best experience on our website. If you decline the use of cookies, this website may not function as expected.
Accept all
Decline all
Read more
Analytics
Tools used to analyze the data to measure the effectiveness of a website and to understand how it works.
Google Analytics
Our website uses Google Analytics to understand how you interact with our site and improve your browsing experience. These cookies collect information in an anonymous form, including the number of visitors to the site, where visitors have come from, and the pages they visited. The data helps us analyze trends and user behavior to enhance our website's functionality and content.
Accept
Decline
Marketing
Set of techniques which have for object the commercial strategy and in particular the market study.
Marketing
Our website uses Google marketing cookies to deliver personalized ads and measure the effectiveness of our advertising campaigns. These cookies track your online activity to help us show you relevant ads on Google services and partner websites.
Accept
Decline