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Money Bag

Unit 3 - Finance & accounts - QB

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Chart Increasing

Unit 1 - Introduction To Business Management - QB

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Briefcase

Unit 2 - Human Resource Management - QB

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Direct Hit

Unit 4 - Marketing - QB

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Factory

Unit 5 - Operations management - QB

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Bar-Chart

Unit 6 - Assessment

🚀 Hey, future business tycoon! 🚀

Let&#39;s dive deep into the exciting world of finance. Buckle up and get ready for a thrilling ride on the finance rollercoaster! 🎢

Question Time! 🤔 What&#39;s the money for?

<ul>
	<li>
	Buying long-term assets? Go for a long-term loan.
	</li>
	<li>
	Need to buy raw materials ASAP? Trade credit is your buddy!

	Real-life Example: If you&rsquo;re opening a pizza shop, you might take a long-term loan for the oven (a big investment) and use trade credit to buy the dough and toppings which you&rsquo;ll use quickly and replenish.
	</li>
</ul>

<ul>
	<li>Financial decisions come with price tags! Think about:
	<ul>
		<li>Interest payments 📈</li>
		<li>Admin costs 🖇️</li>
		<li>Share issue costs 📊</li>
	</ul>
	</li>
	<li>Don&#39;t forget the sneaky opportunity cost. What&rsquo;s the cool thing you&rsquo;re missing out on because you chose another option?</li>
</ul>

Not all businesses are born equal!

<ul>
	<li>
	Public Limited Companies (PLCs) = 🦁 Lots of finance options!
	</li>
	<li>
	Sole Traders = 🐱 Fewer options, because they&#39;re smaller &amp; lesser-known.
	</li>
	<li>
	Fact Check: Only PLCs can issue shares. Sole traders can&#39;t.

	Real-world Example: Imagine PLCs as the popular kids in school with loads of snack options. In contrast, sole traders are the quiet ones with just a sandwich.
	</li>
</ul>

<ul>
	<li>
	Small amount? Consider bank overdrafts 💳.
	</li>
	<li>
	HUGE cash? Long-term loans or issuing shares might be your jam.

	Scenario: Think of it as ordering a meal. Small hunger = a snack (short-term finance). Ravenous appetite = full-course meal (long-term finance).
	</li>
</ul>

<ul>
	<li>
	How easily can a business jump from one finance source to another?
	</li>
	<li>
	Think of unexpected surprises like a sudden demand for winter coats in summer!

	Quick Example: Just like how you switch dance moves to fit the beat, businesses also need to adapt their finance sources based on their needs.
	</li>
</ul>

Spoiler Alert! There are things businesses can&#39;t control.

<ul>
	<li>
	Rising interest rates, inflation = 📈📉 Changing purchasing decisions!
	</li>
	<li>
	If interest rates are rocketing, reconsider that bank loan.

	Real-world Scenario: If it suddenly starts raining, you won&rsquo;t buy an ice cream, right? Similarly, businesses change their financial decisions based on the &#39;economic weather.&#39;
	</li>
</ul>

It&rsquo;s about balancing between share capital and loan capital.

<ul>
	<li>
	High Gearing: More loan capital compared to share capital.
	</li>
	<li>
	Low Gearing: More share capital, less loan capital.

	For the Math Geeks:

	<ul>
		<li>Company A: Loan - $10 million, Share - $50 million = Low geared 🐢</li>
		<li>Company B: Loan - $40 million, Share - $20 million = High geared 🚀</li>
	</ul>
	</li>
	<li>
	Did you know? High-geared companies are like adventure junkies! Risky and banks think twice before lending to them.

	Quick Tip: Check out Chapter 3.6 for the nitty-gritty on calculating the gearing ratio.
	</li>
</ul>

Keep these points in your pocket, and you&#39;ll be making finance decisions like a pro! Remember, every source of finance comes with its own set of dance moves &ndash; so choose wisely and dance to the rhythm of success! 🕺💰

&nbsp;

Happy studying! 📚🌟

Unit 3 - Finance & accounts - QB

Key Factors Determining Finance Source Choices

Table of content

Purpose or use of funds

Cost 💸

Status & size

Unlock the Full Content!

Unit 3 - Finance & accounts - QB

Key Factors Determining Finance Source Choices

Table of content

Purpose or use of funds

Cost 💸

Status & size

Unlock the Full Content!