Unit 2 Managing Financial Resources and Decisions

6487 WordsApr 18, 201526 Pages
CONTENTS 1. Understanding the Sources of Finance Available to a Business Identify the sources of finance available to a business. Assess the implications of the different sources Evaluate appropriate sources of finance for a business project 2. Understanding the Implications of Finance as Resource within a Business Analyse the costs of different sources of finance Explain the importance of financial planning Assess the information needs of different decision makers Explain the impact of finance on the financial statements 3. Making Financial Decisions Based on Financial Information Analyse budgets and make appropriate decisions Explain the calculation of unit costs and making pricing decisions Assess the viability of a…show more content…
No voting rights. Advantages: No need to pay dividends if a low profit year No Dilution of ownership Become part of net worth and therefore reduce debt to equity ratio Disadvantages: Expensive to the company as not tax deductible like interest payments on a loan If you do not pay out a dividend will reflect badly on the company and may stop future investors investing. Costs: Time cost of issuing Pressure cost of performing to be able to pay dividend Rights Issue – offers new shares to existing shareholders at a special price. Advantages: No more dilution of ownership of the company Quick easy form of finance Not as expensive as a public share issue Rarely fails to raise finance Disadvantages/costs: Limit to the amount which can be raised as shareholders will only buy so much Loss of cash due to reduced rate of shares. Time cost of the issue Dilution of current share price Pressure cost to perform so investors can see a return on their investment Debentures – Loan to the firm
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