Sources of fund

Determining appropriate sources of funds

Several factors are to be considered:

The required money

Gearing ratio

Purpose of the fund

Size of the business

 

Determining appropriate sources of funds

 

The required money

If a large amount of money is required the business will opt for long term loan and equity rather than overdraft and retained profits.

 

Gearing ratio

The companies with low gearing ratio will be able to get more loans

 

Purpose of the fund

It would be unwise to do a capital expenditure with a short term loan

 

Size of the business

It would be easier for a bigger company to raise funds