Cash reserves
financing operations using existing cash resources ( for instance retained profit)
Advantages of Cash Reserves
Control
Cost Savings
Arranging Finances
Disadvantages of Cash reserves
Effectiveness
Bank Loan / Overdraft
Firms can borrow from banks and then pay back the loans in instalments, plus interest.
Syndicated Loan
where multiple banks work together to contribute funds in order to provide the required capital
Advantage of Bank Loan/Overdraft / Syndicated Loan
control
cost savings
effectiveness
arranging finance
Disadvantages of Bank Loan/Overdraft/ Syndicated Loan
Security
Costs
Repayable On Demand
Capital Markets
these are financial markets that link organisations seeking capital and investors looking to supply capital. Securities including shares and bonds are traded in the capital markets between governments and companies seeking capital, banks private investors and other investors such as hedge funds and pension funds.
Bond Issue
this is where a company ( issuer) sells bonds (similar to IOUs) through the debt capital markets. Bonds are purchased by investors and entitle them to periodic interest payment (coupon in addition to a lump sum repayment of the principal amount after a set period ( when bond matures).
Advantages of capital markets and bond issue
control
effectiveness
Disadvantage of capital markets and bond issue
demand
arranging finance