Financial Services Essay Example | Topics and Well Written Essays - 1750 words

Financial Services - Essay Example Limited equity financing is used by most of the small or growth stage businesses. Whereas in debt financing, funds pour in from different quarters like from friends, relatives, etc. Venture capitalists are the most common source of equity funding. Venture capitalists may be institutional risk takers, financial institutions, wealthy persons, etc. and most of them specialize in industries. Venture capitalists are risk takers and show interest only in three to five year old companies that result in more than average profits. These venture capitalists are called as investment gurus whose interest lies in those companies that have major regional and national concerns. Commercial finance companies, financial institutions, banks, savings and loans, Lloyds Bank small business, etc. are some of the sources for debt financing. Because of their positive impact on the whole economy local and state government encourage the growth of the small companies. In debt financing additional funds comes from friends, family, relatives, and industry colleagues, etc when capital investment is smaller. Generally banks formed as a major source for loans for the establishment of small businesses. Banks don't offer long term loans to small firms instead they grant short term loans for machinery and equipment, they also offer demand loans to small firms that reduces the risk of leveraging the funds available. The Income Statement presents the summary of the income earned and the expenses incurred during a financial year. Position statement presents the financial position of the business at the end of the year. b) Financing One of the frequent reasons of business failure is poor management and insufficient and poor management of financing comes second1. For starting or relocating or expanding a business sufficient capital is required. Having good financing is not enough in attaining profits; proper knowledge and planning are required to manage it well. These help in strengthening the management of financing and avoid common mistakes like miscalculating or underestimating the cost. The Income Statement presents the summary of the income earned and the expenses incurred during a financial year. Position statement presents the financial position of the business at the end of the year. By Financial Statements, we mean two statements - (i) Profit and loss A/c or Income Statement, and (ii) Balance Sheet or Position Statements. These are prepared at the end of a given period of time. They are indicators of profitability and financial soundness of the business concern. Thus, analysis of Financial Statement means establishing meaningful relationship between various items of the two financial statements, i.e., income statement and position statement. Applying for a loan Loan application should be well written, so that the reader could get a clear picture of what your plans are. The presentation should be of the best quality in the initial loan proposal and application. Only industry specific details should be included so that reader can easily understand. Earning capacity or profitability The overall objective of a business is to earn a satisfactory return on the funds invested in it. Financial analysis helps in ascertaining whether adequate profits are being earned on the capital invested in the