Green Bridge Learning Resource For Financing Business

Overview

Welcome to the course material overview for 'Financing Business' in the field of Commerce. This topic delves into the fundamental aspect of securing financial resources to support the operations and growth of a business entity. Understanding the various sources of finance and types of capital is crucial for the successful management of financial aspects in a business.

One of the primary objectives of this course material is to identify the various ways of financing a business. Businesses have access to multiple sources of finance, including personal savings, sale of shares and bonds, loans, debentures, mortgages, bank overdrafts, ploughing back of profits, credit purchases, and leasing. The diverse range of finance options allows businesses to choose the most suitable based on their needs and financial capabilities.

Furthermore, the course material will elaborate on discussing the different types of capital that are essential for business operations. These include share capital, authorized capital, issued capital, working capital, and owner's equity. Understanding the distinctions between these types of capital is paramount for effective financial management within a business organization.

As part of the learning objectives, students will learn to compute the different forms of capital, profits, and turnover. Calculating these financial metrics is vital for assessing the financial health and performance of a business. Profits, both gross and net, play a significant role in determining the success and sustainability of a business entity.

An integral aspect of this course material is to appraise the problems associated with sourcing finances for business. Businesses often face challenges in securing adequate financial resources, such as high-interest rates on loans, lack of collateral, or strict borrowing requirements. By understanding these obstacles, business managers can proactively address financial issues and seek viable solutions.

Lastly, the course material will assess the role of Bureau de change in an economy. Bureau de change entities play a crucial role in facilitating foreign exchange transactions, especially in economies with international trade activities. Understanding their functions and impact on the economy is vital for comprehending the broader financial landscape.

Objectives

Identify the Various Ways of Financing a Business
Discuss the Different Types of Capital
Compute the Different Forms of Capital, Profits, and Turnover
Appraise the Problems Associated with Sourcing Finances for Business
Assess the Role of Bureau de Change in an Economy

Lesson Note

Not Available

Lesson Evaluation

Congratulations on completing the lesson on Financing Business. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.

You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.

Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.

What are personal savings, sale of shares and bonds, loans, debentures, mortgage, bank overdraft, ploughing back of profit, credit purchase, and leasing considered as in business finance? A. Sources of finance B. Types of capital C. Factors influencing business decisions D. Methods of market research Answer: A. Sources of finance
What type of capital represents the nominal value of shares that a company is authorized to issue according to its registration or constitutional documents? A. Issued capital B. Called up capital C. Owned capital D. Authorized capital Answer: D. Authorized capital
Which of the following is NOT considered as a source of finance for a business? A. Personal savings B. Selling company's products C. Bank loans D. Ploughing back of profits Answer: B. Selling company's products
Working capital is essential in business operations because it helps to: A. Generate long-term profits B. Increase company ownership C. Facilitate day-to-day business activities D. Expand the company's market presence Answer: C. Facilitate day-to-day business activities
What is the main objective of determining the choice of occupation in business? A. Maximizing profits B. Fulfilling societal needs C. Minimizing competition D. Expanding business operations Answer: B. Fulfilling societal needs

Recommended Books

	Business Finance Basics Subtitle Managing Finance for Small Business Genre BUSINESS Publisher Wiley Year 2020 ISBN 978-1119685336 Description A comprehensive guide on managing finances for small businesses
	Fundamentals of Corporate Finance Subtitle An Introduction to Financial Markets Genre ECONOMICS Publisher Pearson Year 2018 ISBN 978-1292235481 Description An introductory book on financial markets and corporate finance

Past Questions

Wondering what past questions for this topic looks like? Here are a number of questions about Financing Business from previous years

WAEC SSCE - Commerce - 2022 (Click to take full assessment)

Question 1 Report

(a) List Four sources of credit available to a sole trader. (b) Explain the following credit instruments: (i) acceptance credit; (ii) luncheon voucher; (iii) bill of exchange. (c) State two advantages and three disadvantages of hire purchase to the seller.

Answer

(a) Four sources of credit available to a sole trader are: 1. Trade credit: This is the credit extended by suppliers to the sole trader to purchase goods or services on credit, with a specified period to pay back the debt. 2. Bank loans: This involves borrowing money from banks to finance the business activities of the sole trader, with an agreement to repay the loan with interest over a specified period. 3. Personal savings: This involves using personal savings to finance the business activities of the sole trader, without incurring any interest charges. 4. Crowdfunding: This involves raising funds for the business activities of the sole trader from a large number of people through an online platform. (b) Explanation of credit instruments: (i) Acceptance credit: This is a type of credit where the seller draws a bill of exchange on the buyer, who accepts the bill by signing it. The buyer is then allowed to defer payment until the maturity of the bill, while the seller can discount the bill with the bank to obtain immediate payment at a reduced amount. (ii) Luncheon voucher: This is a type of credit instrument used to provide employees with subsidized meals during lunchtime. The vouchers are typically issued by the employer and can be redeemed at designated restaurants or canteens. (iii) Bill of exchange: This is a written document that orders the debtor to pay a certain amount of money to the creditor at a specified future date. It is a widely used instrument for financing trade transactions. (c) Advantages and disadvantages of hire purchase to the seller: Advantages: 1. It enables the seller to sell high-value items to customers who cannot afford to make full payment at once, thus increasing sales volume. 2. It provides a regular stream of income for the seller over the hire purchase period. Disadvantages: 1. The seller is exposed to credit risk, as there is a possibility that the buyer may default on payment. 2. The seller may incur administrative costs in managing the hire purchase agreement. 3. The seller may not receive the full value of the goods sold, as the interest charged on the hire purchase may reduce the overall revenue earned.

Answer Details

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