Sources of Finance You need to decide on the most appropriate source of finance for the following situations: Situation Source of finance 1. The company is earning high profits and wishes to expand further in a steady manner. 2. Some of the factories are unprofitable, so the company is seeking to raise money in order to diversify into new areas. 3. Sales are very seasonal and the business needs money to pay a variety of bills that must be settled before it can earn revenue from selling its products. 4. A large firm is seeking to undertake a major expansion programme. Currently interest rates are very high and this has reduced business activity. However, the organisation is confident that the programme will start to produce good returns in 5-10 years’ time, and eventually reap very high rewards. 5. An established firm is hoping to update its computer network. 6. The firm will be purchasing a new office block that will eventually return the initial investment. The firm intends then to repay the sum needed. 7. A small business is involved in a very highrisk but potentially very profitable activity. The current owners would be prepared to share the ownership of the business if necessary.
