Funding Sources & Financial Statements: A Business Guide
Business Funding Sources
There are many sources of finance that a business can leverage to gain the required funding for expansion and other activities. These are broken up into three different categories:
Short Term Finance
- Bank Overdraft: Overdrawing on an account, incurring interest charges based on the duration of the overdraft.
- Short Term Loan: Borrowing a sum of money from a bank for a set period, with interest payable on top of the original sum.
- Bill of Exchange: Similar to an IOU; suppliers can
Understanding Lorenz Curve, Monopsony, Perfect Competition, and Labor Market Dynamics
Lorenz Curve and Income Inequality
The Lorenz curve is used to measure income distribution inequality within a country and compare it to other countries. It relates the percentage of the total population to their share of total income, starting with the poorest. To construct the curve, individuals or families are ranked by income level, from poorest to richest.
Income is grouped into segments, and each group’s income is expressed as a percentage of GDP. For example, the poorest 10% of the population
Read MoreTertiary Economic Activities: Services, Trade, Transport
The Tertiary Sector
The tertiary sector comprises activities not dedicated to producing goods, but rather providing services.
Classification of Services
By Management
- Public Services: Managed by the state, municipalities, autonomous communities, etc. Examples include education and health services.
- Private Services: Offered by private companies.
By Function
- Social Services: Satisfy specific societal needs.
- Administrative Services: Handle various governmental or organizational functions.
- Financial Services:
Factor Markets, Labor Unions, and International Trade
Factor Markets
Factor Price Searcher
A firm that faces an upward-sloping supply curve for resources or factors is a factor price searcher.
Marginal Revenue Product (MRP)
MRP is calculated as Marginal Revenue (MR) multiplied by Marginal Physical Product (MPP). MRP = MR x MPP
Marginal Factor Cost (MFC)
MFC is the additional cost generated by employing an additional factor unit.
Factor Demand
A firm’s factor demand curve is its marginal revenue product (MRP) curve. The MRP curve slopes downward for a product
Read MoreUnderstanding the 2008 Financial Crisis: A Detailed Analysis
The 2008 Financial Crisis: A Detailed Analysis
2001-2006: Phase of Liquidity Degradation in Subprime Lending. The credit crisis begins to expand due to central bank stimuli aimed at paying back banks and securitizing their loans. Investment banks shift away from short-term debts that are renewed daily.
Therefore, interest rates fall dramatically, reducing the WACC (Weighted Average Cost of Capital), and projects with very low ROA (Return on Assets) become profitable. Families begin to demand housing,
Read MoreMarket Structures, Demand, Supply, and Monopoly Dynamics
Types of Market Structures
- Perfect Competition: Many buyers and sellers trading a homogeneous good.
- Monopoly: A single seller offers a good with no close substitutes.
- Oligopoly: A few producers control the market for a largely homogeneous good.
Factors Influencing Demand
The quantity demanded of a good depends on several factors:
- Price of the Good: Generally, the quantity demanded increases as the price decreases (Law of Demand).
- Prices of Other Goods:
- Substitutes: Demand for a good increases when the price