Urgent
You are the finance manager of indian motor ltd, a car manufacture company. You have decided to raise long term finance from financial institute. Explain any four reason to suppourt you choice of source of finance?
Being the finance manager of Indian Motor Ltd., a car manufacturing company, the decision to opt for long term sources is correct due to the following reasons:
i. Purpose and time period- As the company deals in manufacturing of cars and its parts, it will require the purchase of plant and machinery for the production purposes. Therefore, long term finance would be required. Thus, the decision to raise funds from financial institutions proves beneficial as such institutions provide long term funds which are not provided by other banks.
ii. Easy and timely availability of finance- In a car manufacturing company it is important to obtain large amount of finance at the required time. As the institutions are able to provide funds even in the time of depression, where other sources are not available, then opting for financial institutions will be better.
iii. Less burden on business- When raising funds via financial institutions, the company enjoys an option of easy repayment of loan in small instalments. Thus, this reduces the burden on the company or the business.
iv. Goodwill and credibility- If a financial institutions decides to extend loans and funds to the borrowing company, then its goodwill and credibility in the market increases to a new high. This in turn assists the borrowing company to raise funds from other sources as well.
Hence, the decision to raise funds from financial institutions will prove to be beneficial for the car manufacturing company.
i. Purpose and time period- As the company deals in manufacturing of cars and its parts, it will require the purchase of plant and machinery for the production purposes. Therefore, long term finance would be required. Thus, the decision to raise funds from financial institutions proves beneficial as such institutions provide long term funds which are not provided by other banks.
ii. Easy and timely availability of finance- In a car manufacturing company it is important to obtain large amount of finance at the required time. As the institutions are able to provide funds even in the time of depression, where other sources are not available, then opting for financial institutions will be better.
iii. Less burden on business- When raising funds via financial institutions, the company enjoys an option of easy repayment of loan in small instalments. Thus, this reduces the burden on the company or the business.
iv. Goodwill and credibility- If a financial institutions decides to extend loans and funds to the borrowing company, then its goodwill and credibility in the market increases to a new high. This in turn assists the borrowing company to raise funds from other sources as well.
Hence, the decision to raise funds from financial institutions will prove to be beneficial for the car manufacturing company.