Individual Presentation Assignment Sample

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Introduction to Individual Presentation Assignment Sample

Regarding business, one of the most important activities that is an integral component for any organization is finance. It involves the overseeing of resources, assets, and capital required in running and developing an organization. This presentation will specifically focus on the function of finance in an organization, how it relates and interfaces with other organizations' functions as well as the major sources of finance. We shall also analyse the strengths and weaknesses of these sources, understand why businesses may look for other sources other than owner’s funds, and when particular sources of finance can be appropriate.

Individual Presentation Assignment Sample

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Sarah Davis 7 Years | MA

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Finance as a business function

Finance as a business function involves the crucial task of monitoring and directing a firm's financial resources for the realization of strategic goals. It consists of coordinating, leading, and monitoring the financial operations including the preparation of budget, sourcing funds, and even investing. Its main objective is to provide adequate capital needed for a company’s operations and investment in new projects as well as ensure the company is financially sound. The basic components of finance are financial forecasting or advantaging which entails estimating the future financial performance and formulating strategies for reaching the desired finance goals. This encompasses the making of budgets, assessment of financial statements, and control and administration of cash resources. Investment management is the process of using efficiently available resources to achieve targeted returns and fund effective projects. Financial control regulates money spending according to the budget and financial regulations while risk management is the process of identifying risks and preventing their impact on finances. Finance has to work hand in hand with other business functions like marketing, operations, and even human resources to ensure that a company’s financial objectives are in sync with its strategic plans. Through managing and distributing the funds, finance enables the company to achieve the maximum possible state of its financial health, to become a tool in management decision-making, and to be valuable for achieving the long-term goals of the enterprise(Brown, 2020).

Relationship with other business functions

Finance has a strong relationship with the other principles of business since it is central to making certain that there is coordination and efficiency in the operation of business entities.

• Marketing: Marketing works under the guidance of the finance department and gets its budget which helps in the formulation and implementation of marketing campaigns. Promotional spending and market research activities are evaluated and authorised according to the available funds and the potential of earning on the investments made.
• Operations: The finance department works closely with operations to guarantee proper resource management for manufacture, procuring of raw materials, and managing inventory. Financial planning deals with the identification of the capital needed for financing the business while financial control assesses the efficiency of operating costs.
• Human Resources (HR): Of the following pairs of functions, Finance and HR collaborate to control all the costs related to employees’ compensation and other benefits as well as hiring. What is more, HR relies on Finance for guidance on budgets that are required to finance salaries, training, and development programs while Finance in turn depends on HR to gain insights on the workforce requirements and the latest trends in compensation.
• Sales: The finance function assists the sales function by planning for funds for various sales activities and evaluating the financial feasibility of sales activities. Whereas financial data helps in sales prediction, thereby influencing the prices promotions, and offers(Clarke, 2022).

The meaning of Internal and External sources

Internal sources of finance therefore contain funds that are from within the company or those that are raised through internal operations. This includes items such as retained earnings where profits are reinvested in the business instead of being distributed as dividends and internal cash flows from operations which can be from sales. The internal sources are often cheaper and expose one to less risk as opposed to the external sources.

Other sources of finance are those, which are secured from outside the business. For instance, equity financing involves selling of shares to other people in an organization while debt financing is where the organization borrows money from banks through the issue of bonds. Trade credit where the supplier offers credit sale and credit terms, and Venture capital where the investor gives capital coupled with the management of business. Such sources may incur additional expenses and conditions but offer necessary funds for development and functioning(Davis, 2019).

Benefits and limitations of five different sources of finance

Equity Financing:

• Benefits: No repayment on the invested amount since the investors take up an ownership stake in return. It can also bring in desired skills and contacts, which can be helpful to a business.
• Limitations: Causes dispersion of ownership and control of the business; potential investors may demand a voice in the management decisions or a slice of the profits.

Debt Financing:

• Benefits: Enables business to regain complete control without ceding any to its operations and management. Interest expense on borrowed funds is an allowable percentage that can be deducted from income tax payments.
• Limitations: Involve frequent payments and to be specific, impact the organizations monthly cash flow greatly. Debt leads to more financial risk and also might influence credit ratings in case of high amounts of debt(Green, 2019).

Retained Earnings:

• Benefits: Low cost of borrowing or no interference with the ownership rights of the shareholders. It represents business profitability, solvency as well as a sustainable business.
• Limitations: To the extent that such surpluses are limited by the amount of profit made, innovation shall be only to the extent of profit volume. May limit access to capital and, therefore, other investment options.

Trade Credit:

• Benefits: Buys material and services on credit and sells finished goods on a cash basis and thus adjusts cash flow in the short run(Johnson, 2022).
• Limitations: May have negative effects where it may be against the supplier’s interest to have their payments delayed continuously. However, such opportunities can be restricted by the terms set by the supplier and the creditworthiness of the buyer organization.

Venture Capital:

• Benefits: Provides significant financial support as well as technical assistance to startups with high growth rates.
• Limitations: Refers to sharing ownership and sometimes power of the business among different individuals. This finance source usually demands high returns and also the right to manage most operations of the enterprise(Smith, 2021).

The Need for Diverse Financing Sources Beyond Owner’s Funds

• Insufficient Capital: Owner’s funds may not also be able to support large-scale projects or expansions. This can be obtained from outside, other sources which are usually in the form of capital.
• Risk Reduction: The owner’s funds are expensive and risky because all the resources used in business comes from the owner. This risk is spread across different sources, thus minimising the exposure of any one source.
• Immediate Needs: Organizations may need cash on hand for working capital needs or other expenses or investment opportunities. Borrowing from outside has more benefits in terms of time as compared to waiting for owner’s equity.
• Leverage: Debt financing means the use of the company’s own money, which can contribute to a higher profit. If done effectively it can provide greater amounts of growth than the use of only owners’ funds.
• Strategic Value: That is why external investors can contribute not only with money. It may include providing information that could include specializations and contacts in the industry along with important decisions that may assist the business(Thomas, 2021).

The suitability of these sources under possible scenarios

The financing sources selection process depends on the following scenarios for GotoHolidays – a tourism company operating in the European market. Equity financing is ideal for working on the expansion program or development of a new project because it is very expensive but the money required does not come with a short-term repayment plan. But it weakens the ownership and control issues and this might not be the best if one wants to retain most decision-making power. Debt financing is useful in cases where one needs to fulfil short-term cash flow requirements or make purchases of assets. It maintains ownership of the property but must be paid regularly and this might be taxing on the cash flow in the wrong hands. Retained earnings are suitable for financing minor projects or internal expansions since it does not incur the extra cost of purchasing capital. However, this source of funding is limited by the flow of revenue generated by the Company and may not be enough for big projects. Trade credit provides a solution to supplier payment and short-term solvency problems though using it excessively may distort supplier relations and future credit conditions. Justifiably, venture capital is appropriate where the project forms a key operational strategy or market entry initiative as it offers both, capital and managerial expertise. It does so at the cost of a loss of equity and control, which may not always suit the purpose of any business venture. The sources being specific have their merits and demerits that should be weighed to meet GotoHolidays’ financial requirements as well as its strategic plans(Williams, 2020).

Conclusion

In conclusion, the choice of financing sources should be an important focus for GotoHolidays’ strategic development and its efficient operations. Equity, debt, retained earnings, trade credit, and venture capital are used to meet different financial requirements while managing risks and control. An analysis of the benefits and the disadvantages of each source will help make the right decisions and ensure long-term success.

References

• Brown, L., 2020. “Debt Financing and Risk Management in the Modern Economy.” Financial Analysts Journal, 76(2), pp. 50-65.
• Clarke, S., 2022. Modern Financing Strategies for Businesses. Cambridge: Cambridge University Press.
• Davis, K., 2019. Managing Business Finances: A Comprehensive Guide. 3rd ed. New York: McGraw-Hill.
• Green, M., 2019. “The Role of Retained Earnings in Corporate Finance.” Financial Analysts Journal, 75(4), pp. 12-29.
• Johnson, A., 2022. “Venture Capital and Startup Success: A Comprehensive Review.” Financial Analysts Journal, 78(1), pp. 40-55.
• Smith, J., 2021. “Equity Financing Trends and Their Implications for Startups.” Financial Analysts Journal, 77(3), pp. 23-35.
• Thomas, H., 2021. Strategic Financial Management: Theory and Practice. Oxford: Oxford University Press.
• Williams, R., 2020. Corporate Finance: Principles and Practice. 2nd ed. London: Routledge.