And so wellbeing and growth of business depends on how much of financial sources businesses obtain. Businesses require finance to: * To open a company (rent/buy premises, marketing, stock, to buy equipment/machinery etc.) * To operate a company (employees’ wages, to buy more stock, pay for insurance etc.) * To grow a company (open a new branch, export products to other countries etc.) Types of financial sources There are two types of financial sources available for a business: * Internal sources * External sources In addition, they are categorized into short, medium and long term sources of finance: * Short-term: must be paid back within a year.
2nd part of your question: Entrepreneurs usually must start a business with other people's money. The likelihood of success in the new business endeavor is directly related to the entrepreneur's competence in starting and running a business, understanding of the business, market, and industry; and, ability to adapt as market conditions change. Without that, the business will soon go bankrupt... the employees will be out of a job (maybe even out of a paycheck they are owed); the bank will lose money; the suppliers will lose money, the customers will lose money. Everybody loses. Where are the ethics in this?
Stock is up by +115% on last year, but a 20% rise in sales due to new machinery speeding up production is expected and planned for. The high levels of finished stock need to be available for immediate delivery with a +7 rise in orders on last year. Maintenance and cleaning is up by +135% on last year, with the increase in large machinery, this will be an expense that will have to factored in to ensure smooth production. Overall net profit is down, but machinery is a long term investment and will decrease in expense and generate profit in the next few years. Question 2 (A) The balance sheet will indicate the financial position of a business at any one point of time.
P7 Solvency is when a business is able to pay is expenses as it has money available within the business. To determine solvency, businesses can use ratios such as current ratio and acid test ratio. These ratios allow businesses and potential investors to see how well that are able to meet their liabilities. Current Assets Current ratio = Current liabilities The acid test ratio shows the assets compared to liabilities, like the current ratio, but by taking out the stock figure from the current assets, it shows how well a business can meet its liabilities without having to sell stock, Current assets - stock Acid test ratio = Current liabilities Profitability Ratios can also show how profitable a business really is either as a snapshot or over time. There are three ways of working out how profitable a business really is: * Gross profit percentage – This calculation shows gross profit as a percentage of the turnover.
This process in return will create a new asset- a loan. Once the bank charges the interest rate and pays their portion of interest rate to the Federal Reserve, the bank then makes profit of the company that is borrowing money from them. The financial market helps aid the economy by generating financial assets. Furthermore, financial markets play a significant role in the economy in so many ways. From the business aspect and individual
A cash flow problem is when there is an insufficient amount of money to meet the end of month/year bills. A potential problem maybe overdraft, this is when more money is taken out of a bank account than is in it, when this happens it becomes overdrawn. The business owners, Sharma and Ryan need to think of the problems that they may face, using the cash flow forecast we are able to see that they have a stable net cash flow all throughout the year although they have not thought about the problems that they may face, by buying the capital equipment in full (£105,000) it shows that they have not thought much into there options, they could of spread the costs of the capital across 12 months so that that the monthly costs will be £8750.00, by doing this it will prepare the business for future problems if
Question 2: There is a direct relationship between project Size and project profitability. While larger projects have a larger overhead cost they are more profitable long term. The largest 20 projects earned an average cost per project of $16,392.86 compared to the smallest 100 projects average cost per project of $10,721.43. We calculated these numbers by dividing total overhead cost allocated using the ABC method by the total number of projects. Question 3: According to the calculation and data analyzed in Question 2, the profit margin of largest 20 projects and smallest 100 projects are 44.01% and 1.86% respectively.
Meanwhile, although the community bank has a lot of customers who are the families and small companies bring great revenue, the risk of non-accrual loan increased, which is harmful to the whole company because its revenue account for 71% of Wells Fargo. Comparing with its competitor – Chase bank, which is also use the diversification strategy, but its revenue is divided among several different sectors, which means decrease the risk in each sectors. Therefore, Wells Fargo should not much rely on its community bank like before. Recommendations In my opinion, first, Wells Fargo should set out several key products in each segment of the community bank instead of just to develop the new product blindly, such as in the investing services segment, Wells Fargo can focus on the aging population and diverse population. Second, Wells Fargo should increase the market share of wholesale banking.
When the country has a surplus, the more the country retains of its total output, the more tax payers retain of their income. When the country has a budget deficit it devalues the GDP, as money earned from what the country produces will be lost in paying back the deficit. If a country has a GDP of $1 trillion and a budget deficit of $200 billion, the country only gains $800 billion on its GDP. Debt is similar to a deficit except debt builds up over the years and grows with each yearly deficit. The problem with debt is there is an interest payment that must be paid.
In contrast, back in 2008, when the global financial climate and stock markets were trepid, it created a surplus for many retailers and for a period, leaving items sitting on shelves longer than usual. Many businesses closed their doors, in fact, the only retailers that thrived during this tenuous financial climate were “dollar stores” (Tseng. 2012) “The immediate effect of fiscal policy is to change the aggregate demand for goods and services. A fiscal expansion, for example, raises aggregate demand through one of two channels. First, if the government increases its purchases but keeps taxes constant, it increases demand directly.