The paper "Business Simulation Diary and Finance Department " is a great example of a Business Assignment. The main financial concern for Spam Computers in the first quarter is the source of funds to mobilize the marketing strategy the team has chosen as well as the funds that will be used to purchase the market research. Moving on blindly is not an option for Spam Computers if it wants to succeed and there is a lot of concern about mobilizing people and marketing campaigns that money issue becomes important.
At this stage, the organization has two options to choose from when it comes to financing its activity – debt financing or equity financing. With debt financing, Spam Computers will have to approach banks and other financial institutions that would lend their money to the company to be paid with high-interest rates for a specific period of time. With equity financing, Spam Computers can have the funds it needs but will lose ownership and control of the company. I am looking at $500, 000 - $1, 000, 000 capital funds needed to mobilize the plan and meet the goals set by the marketing and advertising departments.
Everyone in the team thinks that Spam Computer is too weak (financially) to acquire debts. At the same time, the PC Division does not have enough strength to work independently from Spam Computer and proceed with an IPO to gather funds from stockholders. The majority of the members of the team think that it is unwise to lose control of the decision process of this stage of development of the PC division. I am looking at the following strategies (as well as the justifications of these strategies) for the next three months in order to help the organization achieve its goals and objectives. (a) Choose debt financing to fund financial needs.
Spam Computers would need to retain the decision-making process within its management team as the success of the project lies in the key personnel responsible for various tasks ahead. Business organizations such as Spam Computers would prefer to borrow money from lenders in exchange for freedom from outside interference when it comes to making huge business decisions (Richards, 2008).
As it is, Spam Computers has a high probability to succeed if it retains ownership of the company and can make a decision on its own without having external factors interfering in its decision-making processes. Since the PC Division wants to enter a new market, the debt financing it needs to finance its activities does not necessarily mean it has to borrow from external sources. (b) Appropriate the budget to the various departments that would need it and require budget plans for approval from these departments before approval is given.
Budgeting is crucial in working with scarce funds. By requiring the Brand Management, Advertising, and Sales Management teams to submit their proposed budget for the whole duration of the project, the whole team can anticipate financial issues that may arise in the future. (c) Struggle with the disadvantages associated with debt financing. Of course, there are prices to pay for choosing debt financing over equity financing. Some of the notable disadvantages of using debt financing include the forced repayment of the debt, high-interest rates, cash and collaterals, and impacts on the credit rating.
Credit institutions usually require proofs of ability to pay for the loaned amount (or collateral) in the form of cash or properties. Debt financing holds back most of the company’ s plan to invest in the future as it forces the company to earn sufficient money to pay for the periodic debt payments and operate top speed at the same time. In order to avoid possible issues in the future, the strategy must deliberately include these disadvantages to optimize resources and income-generating activities and minimize activities requiring expenses.
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