Business Management-Source of finance金融.ppt

3.1 Sources of Finance Part 2 What is finance? The ability to access money in order to fund business activities. Many different business activities need finance. Can you name some? Business Activities to Finance What is Capital? Can be Cash, Equipment, Buildings Startup Capital Money needed to start a business to: buy equipment, rent/buy a building, purchase inventory Working Capital Money needed to operate the day-to-day activities of the business: pay bills, pay employees, buy supplies Business Expansion Move to a larger location, hire more people, equipment upgrades Business Activities to Finance Business Expansion Expansion can occur by purchasing other businesses; may need extra money to do this Special Situations Decline in sales could leave company without enough cash; a customer could fail to pay his bill in time; unexpected repair expenses Research and Development Invest in new markets, create new products Time to Finance Short-Term Financing One year or less Medium-Term Financing One to five years Long-Term Financing Over 5 years Financing Expenditures Capital Expenditures Purchasing fixed assets that will last over one year (things that aren’t consumed in the day-to-day operation of the business) Buildings, machinery, or cars (What are ASSETS?) Revenue Expenditures Spending that occurs in order to produce your product or service Wages, inventory, supplies, utilities Financing these two different types of spending will be very different as the length of time for “pay back” is different. Sources of Financing Internal Money Money raised by the business’s own assets or from the profits left over from the business. Profits Retained by the business Sale of Assets Reductions in Working Capital External Money Sources from outside the business Bank Overdrafts (Credit Line) Trade Credit Debt Factoring (Selling Receivables at a discount) Internal Sources of Finance Profits retained by the business Profit that is kept by the business after taxes and di