They may not meet the requirements of the stock exchange so as to float their shares e.g for a company to go public such a company must have a minimum of shs. 2,000,000 or such £ 100,000 which very few companies may have. Lenders also discriminate against small companies in their lending activities in particular due to ownership of small companies most of which are sole traders whose life span is equivalent to that of the owner, this means that they viewed as highly risky areas of investment. Big companies not only are they able to raise share capital, but also can sell their debentures even under credit squeeze, which condition usually makes it difficult for small companies to raise finance. Repayment Patten These include the repayment of principal and interest. Ideally a company’s repayment of principal should be spared over such a period as can enable the asset and or the project financed to pay back. In case of interest the company. Review Questions 1. Explain the main sources of finance for businesses What are the advantages of equity finance? Describe the requirements a company must meet before it can raise debt finance Explain Limitations of debt finance/ disadvantages of using debt finance to the company Explain reasons why factoring is not popular in Kenya What are the advantages of using debenture finance
Advantages of using debenture finance to ordinary shareholders. Explain the advantages of sale-lease back 107
CHAPTER SIX 6.0 BUSINESS PLAN DEVELOPMENT In this chapter, we shall discuss the structure of business plain which entails business description ,product/ service description ,definition of the product or service ,marketing plan, organizational and management plan ,financial statement ( personal) ,executive summary and appendices. General Objectives By the end of the course the learner should be able to develop a business plan. Specifically the learner should: 1. Explain the motives for capital expenditure and the steps followed in the capital budgeting process. Define business plan Explain the importance of business plan; Explain the components of a business plan 6.1 Planning for the Business Venture Planning is a predetermine cause of action. It is a statement outlining an organizational mission and future direction, short and long term performance, targets and strategies Planning as a formal document contain a mission statement description of the firm’s goods and services, a market analysis, financial projections and description of management strategies together with policies for attain the goals. Planning is a process of determining the goals and objectives of the enterprises for a future period of time developing the strategies guiding the firms operational and utilizing the available resources towards achieving the set goals and objectives.
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- Spring '16