Manging Financial Resources and Decisions Assignment - 1

Manging Financial Resources and Decisions - Assignment Example(NEEDHAM. 1995)Each source of pay has its cost which is an important factor to consider in choosing the source of finance. Equity capital as a source of finance, through ordinary and preference partake ins has a cost of share in the companys holding and dividend payments have to be made to the shareholders. Retained profits as a source of finance potentially involve no cost to the company. Debentures are another important source of finance which has arouse payments to be made to the debenture holders. Bank finance and overdraft facility by the banks also involves payment of busy to the banks. On the other hand specific assets can be funded by hire purchase and leasing which leave behind involves rental payments to the lessor. The company can also use its trade debtors for short term source of finance which could be done by factoring. This could involve an amount of payment to the factoring company and in slightly cas es loss of reputation as the factoring company may not treat the debtors well. (DRANSFIELD. 2004)Mr. Singh needs finance to fund the premise and dismay up his business. He might not require additional money for starting up of this business as he already got a redundancy payment. To finance the premises Mr. Singh can obtain a mortgage loan from any bank and financial institution. This is the most assume source of finance for the premises, land and buildings. The lending institution will process the loan and Mr. Singh would get to start his business immediately and can repay the loan over the years as his business gets stronger. (NEEDHAM. 1995)A public listed company has many options to be used as a source of finance. The company could annul 5 million by either equity finance or debt finance. There will be various factors that need to be considered for both the options. For equity financing the company has to see its authorized share capital before issuing new shares. For debt fin ancing