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Analyse one short term and one long term source of finance available for the Clú-He start up - Leaving Cert Business - Question A - 2003
Question A
Analyse one short term and one long term source of finance available for the Clú-He start up. Clú-He is a new brand name in the children's toys and games business. ... show full transcript
Worked Solution & Example Answer:Analyse one short term and one long term source of finance available for the Clú-He start up - Leaving Cert Business - Question A - 2003
Step 1
Analyse one short term source of finance available for the Clú-He start up.
Answer
One short term source of finance that Clodagh can consider is a Bank Overdraft. A bank overdraft is a flexible short-term loan that allows the business to draw more money than is available in its account. It can be used to cover immediate expenses and to ensure that the business can meet its short-term obligations, especially during its initial phase. This form of finance can be particularly useful for covering unexpected costs or fluctuations in cash flow. However, it is crucial for Clodagh to manage the overdraft carefully to avoid high-interest charges and ensure timely repayments.
Step 2
Analyse one long term source of finance available for the Clú-He start up.
Answer
A viable long-term source of finance for Clodagh is Equity Finance through Ordinary Shares. By issuing shares to investors, Clodagh can raise significant capital without the obligation of repayment like a loan would dictate. Equity finance allows Clodagh to access funds for long-term investments, such as production facilities and marketing strategies. Additionally, this source of finance does not create immediate financial pressures since shareholders typically expect returns over a longer period in the form of dividends when the business is successful. However, Clodagh must consider the dilution of ownership and the influence of shareholders in decision-making processes.