Business Finance: Sources, Costs, and Investment Strategies
Sources of Company Financing
Financing refers to liquid resources or means of payment available to a company to meet its monetary needs. It can be classified according to three criteria:
- Classification Based on Repayment Timeframe:
- Sources of financing in the short term (less than 1 year)
- Sources of financing in the long term (over 1 year)
- Classification Based on Source Origin:
- Internal financing (reserves)
- External financing (equity, loans)
- Classification Based on Ownership of Funds:
- Company’s own funds
International Monetary System Shifts: 19th Century to Interwar Period
Key Changes in the International Monetary System: 19th Century to Interwar Period
After the First World War, almost all European currencies were below par values, as inflationary financing and balance of payments deficits had caused currency depreciation, despite controls on the balance of payments. While all countries considered it desirable to restore the gold standard, only the dollar was able to do so quickly (1919), serving as a reference for the implementation of other currencies, as the pound
Read MoreUnderstanding Market Economy, Business, and Entrepreneurship
Long Questions:
The Market Economy System: Characteristics, Advantages, and Disadvantages
Features:
- Exchange
- Freedom of Free-Trade
- Free Enterprise
- Free Market
- Equality under the Law
- Property Accumulation of Capital (Savings Reinvestment)
- State Intervention Beyond Police and Justice
Benefits:
- Growth (Maximum Continuous), Production
- Low Prices
- Minimum Costs (No Waste)
- Null-Benefit in the Long Term
- Better Motivation and Innovation
- Fewer Taxes, Less Corruption
- Better Cohesion and Democracy
Disadvantages:
- Environmental
Understanding Double-Entry Accounting and Financial Accounts
Early Double-Entry Accounting
- Assets must be recorded on the debit side.
- Liabilities must be recorded on the credit side.
- Outflows are recorded on the debit side.
- Income is recorded on the credit side.
- Equity is recorded on the credit side.
- Everything that comes out of an account must be balanced.
- Columns must be balanced.
Accounts
Assets
Cash and Bank Accounts
Accounts used to record deposits in checking accounts at national banks or abroad, freely available funds, and others that serve as payment.
- Cash: Cash
Understanding Business Investments and Financial Resources
The rental income for this method is 100% tax deductible, and there is no minimum duration of the lease. At the end of the contract, the lessee company is given the option of renting equipment to replace or renew the contract for a further period to be determined. Unlike leasing, no lessee can purchase at the end of the contract.
Distinguishing Between the Cost of Outside Resources and That of Resources
Most of the resources used by the company involve a cost. The company will try to get that source
Read MoreAccounting Standards for Inventory Valuation and Impairment
Buying Valuation Rules (Rule 10 of the PGC and 12 of the PGC for SMEs)
- All expenses for shopping, whatever their nature, even when VAT is not recoverable, will be charged to account 600 (purchases of goods), increasing the purchase price.
- The financial costs (interest) can only be attributed to the purchase price if you are with conviction, not exceeding one year and not have a contractual interest rate. If you are long term, applies the rules of valuation of assets, therefore, be charged the cost