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Financing and cost accounting

1.3 Sources of finance – other sources

 Government grants

 Business angels/venture capitalists

 Selling spare assets.

1.4 Factors to consider when choosing a source of finance

Example: debt or equity?

 Cost Debt is cheaper

 Availability Debt is usually more readily available

 Control Debt doesn’t affect control

 Cash flow Debt requires reliable/steady cash flows

 Security Debt requires tangible, marketable assets as security

 Gearing Debt will increase business risk

 Exit routes Debt needs to be repaid

Illustrations and further practice

Now try TYU questions 2 and 3.

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