financing decision in financial management

financing decision

1. Chapter 3 Financing decisions

2. Imagine you're the CEO of a promising tech startup, TechNova , that has developed an innovative AI-powered personal assistant. Your product has gained traction in beta testing, and you're ready to scale up operations. However, you need $10 million to fund your expansion plans, including hiring more developers, ramping up marketing efforts, and improving your server infrastructure. You're now faced with a crucial decision: How should you raise this capital?

3. As TechNova's CEO, you have several options: Equity Financing : Seek venture capital funding by selling a portion of your company's ownership. Debt Financing : Take out a loan from a bank or issue corporate bonds. Hybrid Financing : Use a combination of debt and equity, such as convertible bonds. Alternative Financing : Explore options like crowdfunding or government grants.

4. How do different financing options affect a company's capital structure? What factors should managers consider when choosing between debt and equity? How do market conditions influence financing decisions? What are the long-term implications of various financing choices? How do financing decisions impact a company's valuation and stock price?

5. Financial Management Decisions Financing Investment Dividend Working capital management

6. FINANCING DECISION Financing decision refers to the decision of financial executive in estimating the total capital funds of business unit and mobilization of the same by selecting suitable securities

7. Characteristics of financial plan Simple Long term view Flexible Optimum use of funds

8. Sources of finance Permanent sources Share capital Retained profits Long term sources Redeemable preference shares Debentures Long term loans Seed capital / venture capital

9. Sources of finance Medium term sources Medium term loans Deferred credit Public deposits Working capital term loans

10. Sources of finance Short term sources Cash credit Overdraft Bills discounting Commercial paper Trade credit

11. Long term funds Share- A share indicate a smaller unit into which the overall requirement of capital of a company is subdivided Two types of shares Equity shares Preference shares

12. Equity shares Characteristics Real owners of the company Permanent source of capital Unsecured assets Returns in the form of dividend Risk free source of capital

13. Equity shares Advantages Disadvantages To the company No obligation to pay the dividend No charge of securities Permanent source of capital To the company No trading on equity Over capitalisation To share holders Real owners of the company Share in profit No fixed income

14. Preference shares Characteristics Not absolute owners Repaid during existence Unsecured advances More risk

15. Types of preference shares Cumulative Preference shares Non cumulative preference shares Redeemable preference shares Irredeemable preference shares Participating preference shares Convertible preference shares

16. Debentures Debentures refer to the document containing acknowledgement of indebtness issued by the company and giving an undertaking to repay the debt at a specified date or at the option of the company

17. Characteristics Not the real owners of the company Repaid during the lifetime of the company Secured Returns in the form of interest Risky Cheap source of funds

18. Types REGISTERED BEARER CONVERTIBLE NON CONVERTIBLE REDEEMABLE IRREDEEMABLE CONVERTIBLE NON CONVERTIBLE

19. Study of financial Statements: Financial Statements means Balance Sheet, P & L A/c and sources and uses of funds statement