Managing Financial resources and Development Free essay! Download now
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Managing Financial resources and Development
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| Words: 5991 | Submitted: 01-May-2011
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DescriptionThis report is about managing financial resource of a company, it describes how and when a company wants to seek finance among the best
Task 1 Explore the sources of finance available to LegIT
identify the sources of finance available to LegIT to expand operations to undertake the EA Sports project (Identify all source of finance, give a brief description on each of them, and pick three sources which are most suitable for LegIT)
Sources of finance
Personal savings: Personal savings are amounts of money that it helps for a business person or for a purpose of education and partner or shareholder has at their disposal to do with as they wish. If that person uses their savings to invest in their own or another business, then the source of finance comes under the heading of personal savings.
E.g.: Business people are used to substantial sum of their own money to help finance and to their business.
Retain profit: When a business makes a profit and it does not spend it, and accountant call profit that are save and not spending are retain profits. It helps to business with buying machineries, vehicles, and computers and so on or developing the business in any other way.
Working capital: This is the short-term capital or finance that a business keeps. Working capital is the money used to pay for the everyday trading activities carried out by the business - stationery needs, staff salaries and wages, rent, energy bills, payments for supplies and so on. Working capital is defined as:
Working capital = current assets - current liabilities
Current assets: are short term sources of finance such as stocks, debtors and cash the amount of cash and cash equivalents to the business has at any one time. Cash is cash in hand and deposits payable on demand (e.g. current accounts). Cash equivalents are short term and highly liquid investments which are easily and immediately convertible into cash.
Current liabilities: are short term requirements for cash including trade creditors, expense creditors, tax owing, dividends owing - the amount of money the business owes to other people/groups/businesses at any one time that needs to be repaid within the next month.
Sale of assets: Business balance sheets usually have several fixed assets on them. A fixed asset is anything that is not used up in the production of the good or service concerned - land, buildings, fixtures and fittings, machinery, vehicles and so on. At times, one or more of these fixed assets may be surplus to requirements and can be sold. Alternatively, a business may desperately need to find some cash so it decides to stop offering certain products or services and because of that can sell some of its fixed assets. Hence, by selling fixed assets, ...
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