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Finance and Accounting - Coggle Diagram

- - - - day-to-day expenses
      - If the business runs out of working capital, it becomes illiquid (can't pay its short-term debts)
      - Working capital= current assets - current liabilities
    - - Too much working capital leads to opportunity cost of too much capital being tied up
      - The longer the working capital cycle, the greater amount of working capital required
    - - Keeping a smaller inventory
        
        Use Just In Time production system to keep inventory smaller!
      - Tracking sales via a computer
  - - - Downside: it can negatively affect the business liquidity position
  - - - Hire purchase
      - Leasing
      - Medium-term bank loan
    - - Debenture
      - Long-term bank loans
      - Grants
      - Venture capital
    - - Bank overdraft
      - Trade credit
      - Debt Factoring
  - - - Permanent finance
    - - Public issue by prospectus
      - Arranging a placing of shares with institutional investors without the expense of a full public issue - this is done by the means of a rights issue.
  - - - Ownership is not diluted
      - Lenders have no voting rights
      - Interest is paid before tax
      - No increase in liabilities
    - - Never needs to be repaid
      - Dividends must be paid whenever the business has enough profits
  - - - Finance available:
        
        Bank overdraft, bank loans inc. microfianace
        
        crowd funding
        
        credit from suppliers (trade payables)
        
        loans from friends and family
        
        owners personal investment
        
        taking on partners with capital to invest