HSC Business Studies Notes

11,735 views

Published on

Find the HSC Business Studies CRAM Apps on facebook and on the App Store (from 26/07).

These notes cover the advantages and disadvantages of each of the external sources of finance.

They're a tiny part of the new Finance CRAM App (available on the App Store from 26/07). It has three-and-a-half HOURS of VIDEOS that explain everything you need to know about the finance topic.

Like the facebook page for all the latest info about upcoming Business Studies apps and for help with the upcoming Trial exam. Once you've clicked Like, you'll find out the MINUTE that the app is available so you can start cramming.

Even if you're a better student, this is still another resource you can use. Let's face it, there are parts of every major textbook that aren't entirely clear.

Quick link to fb page: http://www.tinyurl.com/HSCBusinessCRAM
Quick link to App Store: http://www.tinyurl.com/financeCRAM (from 26/07)
Sample VIDEOS on YouTube:
http://www.youtube.com/watch?v=fG2LmezkOgY&feature=plcp
http://www.youtube.com/watch?v=LXUWNzlFfIE&feature=plcp

0 Comments
3 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
11,735
On SlideShare
0
From Embeds
0
Number of Embeds
38
Actions
Shares
0
Downloads
101
Comments
0
Likes
3
Embeds 0
No embeds

No notes for slide

HSC Business Studies Notes

  1. 1. Enjoy  these  FREE  NOTES They’re  part  of  the  new   HSC  Business  Studies  CRAM  app   FINANCE   The  app  includes  THREE  AND  A  HALF  HOURS of  videos  and  visual   explanaIons  of   all  the  most   important   parts   of   the   topic   that   you   can   take   with  you  wherever  you  go. To  stay  up  to  date  on  the  latest  updates,  Like  the  Facebook  page   h?ps://www.facebook.com/HscBusinessStudiesCramApps)The  Finance  App  will  be   available  on   July  26th,  2012 h?p://itunes.apple.com/au/app/finance-­‐business-­‐studies-­‐cram/id545069870?ls=1&mt=8
  2. 2. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT Long-­‐term   Short-­‐term  EXTERNAL   OverdraW Mortgages   Debentures  (debt) Commercial  bills Factoring Unsecured  Notes Leasing Private  EquityEXTERNAL  (equity) Ordinary  shares External  sources  are   New  issues Rights  issues from  OUTSIDE  the  business Placements e.g.  Banks Share  purchase  plans e.g.  Shareholders
  3. 3. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT ADVANTAGES DISADVANTAGESDoesn’t  increase  debt  levels Future  profits  have  to  be  shared  with  more   investors  (ownership  is  ‘diluted’)No  interest  payments Change  of  ownership  structure Private  Equity EXTERNAL  (equity) Ordinary  shares New  issues Rights  issues Placements Share  purchase  plans
  4. 4. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Equity  sources 1.  Ordinary  shares Just  write  ‘ordinary’  before  the  word  shares (you  don’t  need  to  know  the  “not  ordinary”  type) INVESTORS  PAY  THE  BUSINESS  MONEY… …  for:   -­‐  Share  of  OWNERSHIP   -­‐  Share  of  PROFITS  through  dividend  payments       RISKS:   1.  The  business  may  not  make  a  profit.           2.  The  owners  may  decide  to  reinvest                    the  profits  instead  of  sharing  them.   -­‐  VOTING  RIGHTS     BUT:     Only  according  to  number  of  shares
  5. 5. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Equity  sources 1.  Ordinary  shares ADVANTAGES DISADVANTAGESNo  interest  payments The  process  of  issuing  shares  (e.g.  through  an   IPO)  is  expensive  and  takes  longer  than  debt   financeEven  though  you  CAN  (and  should)  share   Not  enough  people  might  buy  them  –  called  future  profits  (‘dividends’),  there  is  sIll  a   ‘undersubscripIon’  (CS  Facebook)choice  in  paying  (unlike  loan  repayments) DiluIon  of  ownership  (profits  shared  between   more  owners) Sample  from  Finance  -­‐  HSC  Business  Studies  CRAM  App  (available  26/07)  www.Inyurl.com/financeCRAM Like  the  facebook  page  for  the  latest  updates  and  giveaways  -­‐  www.Inyurl.com/HSCBusinessCRAM
  6. 6. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Equity  sources 1.  Ordinary  shares i.  New  issues ii.  Rights  issues iii.  Placements iv.  Share  purchase  plans WAYS   of  issuing  ordinary  sharesSample  from  Finance  -­‐  HSC  Business  Studies  CRAM  App  (available  26/07)  www.Inyurl.com/financeCRAM Like  the  facebook  page  for  the  latest  updates  and  giveaways  -­‐  www.Inyurl.com/HSCBusinessCRAM
  7. 7. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Equity  sources 1.  Ordinary  shares i.  New  issuesI POAt  first,  this  is  done  through  an 1. Issue  a  Prospectus (here’s  everything  you  need  to  know   about  our  business) 2.  Sell  shares  on  the  ASX nital ublic ffering ADVANTAGES DISADVANTAGESIf  successful,  gets  the  largest  amount  of  funds Expensive  and  takes  longer  than  debt  financeIf  it  is  ‘underwriben’,  it  is  fairly  safe  (a  business   Not  enough  people  might  buy  them  –  called  can  agree  to  buy  any  unsold  shares) ‘undersubscripIon’  (CS  Facebook)
  8. 8. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Equity  sources 1.  Ordinary  shares ii.  Rights  issuesAFTER  the   EXISTING  SHAREHOLDERS get  to  buy   MORE  SHARES   at  a   SPECIAL  PRICE ADVANTAGES DISADVANTAGESCheaper  than  the  IPO Lower  priceFaster  than  the  IPO Less  possible  buyers
  9. 9. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Equity  sources 1.  Ordinary  shares iii.  PlacementsPRIVATELY  selling  shares                (NOT  through  an  IPO) ADVANTAGES DISADVANTAGESCheaper  than  an  IPO May  not  raise  as  much  as  an  IPO  wouldFaster  than  an  IPOEasier  than  an  IPO
  10. 10. Enjoy  these  FREE  NOTES They’re  part  of  the  new   HSC  Business  Studies  CRAM  app   FINANCE   The  app  includes  THREE  AND  A  HALF  HOURS of  videos  and  visual   explanaIons  of   all  the  most   important   parts   of   the   topic   that   you   can   take   with  you  wherever  you  go. To  stay  up  to  date  on  the  latest  updates,  Like  the  Facebook  page   h?ps://www.facebook.com/HscBusinessStudiesCramApps)The  Finance  App  will  be   available  on   July  26th,  2012 h?p://itunes.apple.com/au/app/finance-­‐business-­‐studies-­‐cram/id545069870?ls=1&mt=8
  11. 11. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Equity  sources 1.  Ordinary  shares iv.  Share  purchase  plansShareholders  can  choose  to  getSHARES  instead  of  DIVIDENDS ADVANTAGES DISADVANTAGESQuick Probably  at  a  lower  price  than  offering  new   sharesCheap
  12. 12. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Equity  sources 2.  Private  Equity There  are  ‘private  equity’  firms businesses  that  buy  other  businesses (or  part  of  them) ADVANTAGES DISADVANTAGESAccess  to  enormous  amounts  of  money Original  owners  lose  a  lot  of  controlEasier  than  an  IPO Somegmes  private  equity  firms  are  not   interested  in  growing  the  business  (they  just   want  to  cut  costs  or  even  shut  down  the   business  and  sell  its  assets)SomeImes  the  investors  have  good  ideas  for  the  business
  13. 13. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Long-­‐term   Short-­‐term  EXTERNAL   OverdraW Mortgages   Debentures  (debt) Commercial  bills Factoring Unsecured  Notes LeasingBORROWING
  14. 14. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Long-­‐term   Short-­‐term   EXTERNAL   OverdraW Mortgages   Debentures   (debt) Commercial  bills Factoring Unsecured  Notes BORROWING Leasing ADVANTAGES DISADVANTAGESNo  change  to  ownership  structure Interest  paymentsFaster  and  more  straigheorward  than  an  IPO Compulsory  payments  at  set  dates  (unlike   dividends)Tax  advantages Security  might  be  required  (e.g.  mortgage  may   require  using  the  property  as  collateral)
  15. 15. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Debt  sources 1.  SHORT-­‐term  borrowing <  1  year repay  inShort-­‐term   i.  OverdraW ii.  Commercial  bills iii.  Factoring
  16. 16. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Debt  sources 1.  SHORT-­‐term  borrowing i.  OverdraWSHORT  NOTICE  short-­‐term  loan  from  a  BANK                                    (usually  smaller  amounts  <$100,000) ADVANTAGES DISADVANTAGESAvailable  at  short  noIce Higher  interest  rate  (and  variable)Flexible The  bank  can  demand  repayment  at  any  Ime   (usually  don’t  though)Usually  not  secured  against  assets APP  STORE  LINK:  www.Inyurl.com/financeCRAM FB  PAGE  LINK:  www.Inyurl.com/HSCBusinessCRAM
  17. 17. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Debt  sources 1.  SHORT-­‐term  borrowing ii.  Commercial  BillsSHORT  TERM  loan  from  a  BANK  or  NBFI                                          (usually  LARGER  amounts  >$100,000)                                              (usually  7-­‐180  days) ADVANTAGES DISADVANTAGESOnly  interest  is  paid  (unIl  the  end) Usually  secured  against  assetsFlexible  (length  of  Ime;  amount  of  interest) Sample  from  Finance  -­‐  HSC  Business  Studies  CRAM  App  (available  26/07)  www.Inyurl.com/financeCRAM Like  the  facebook  page  for  the  latest  updates  and  giveaways  -­‐  www.Inyurl.com/HSCBusinessCRAM
  18. 18. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Debt  sources 1.  SHORT-­‐term  borrowing iii.  Factoring BALANCE  SHEET ‘Accounts’   are  when  money  is  owed. ‘Accounts   RECEIVABLE’   are  when  your  business  is   OWED  money  BY   CUSTOMERS.
  19. 19. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Debt  sources 1.  SHORT-­‐term  borrowing iii.  Factoring But  what  if  they’re  not  paying  on  gme? What  if  you  need  that  money  NOW? ‘Accounts   RECEIVABLE’   are  when  your  business  is  You  can  SELL  your  ‘accounts  receivable’   OWED  money  BY   to  a  business  (called  a  ‘Debt  Factor’)   CUSTOMERS. for  a  percentage  of  their  total  value.
  20. 20. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Debt  sources 1.  SHORT-­‐term  borrowing iii.  Factoring ADVANTAGES DISADVANTAGESYour  business  gets  cash  straight  away It’s  usually  only  80%  of  what  you  were  owedYou  save  on  Ime  and  effort  chasing  customers   APP  STORE  LINK:  www.Inyurl.com/financeCRAM(legal  bills  too) FB  PAGE  LINK:  www.Inyurl.com/HSCBusinessCRAM You  can  SELL  your  ‘accounts  receivable’   to  a  business  (called  a  ‘Debt  Factor’)   for  a  percentage  of  their  total  value.
  21. 21. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Debt  sources 2.  LONG-­‐term  borrowing repay  in >  1  yearLong-­‐term   i.  Mortgages   ii.  Debentures   iii.  Unsecured  Notes iv.  Leasing
  22. 22. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Debt  sources 2.  LONG-­‐term  borrowing i.  MortgageLARGE  loansfrom  a  bankSECURED  AGAINST ADVANTAGESthe  business’s  land/buildings Access  to  large  amounts  of  money   DISADVANTAGES (especially  for  SMEs)Not  meeIng  repayments  might  lead   “Unlocks”  the  value  that  the  business  has   in  its  land/buildings  (so  the  money  can  be  to  foreclosure used  to  grow  the  business)
  23. 23. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Debt  sources 2.  LONG-­‐term  borrowing ii.  DebenturesLARGE  loansSECURED  AGAINSTthe  business’s  assetsFROM  INVESTORS(instead  of  a  bank) but… The  right  to  collect  the  money  can  be  SOLD (so  you  won’t  necessarily  be  paying  back  the  same  people)
  24. 24. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Debt  sources 2.  LONG-­‐term  borrowing iii.  Unsecured  notesLARGE  loansFROM  INVESTORS APP  STORE  LINK:  www.Inyurl.com/financeCRAM FB  PAGE  LINK:  www.Inyurl.com/HSCBusinessCRAMNOT  SECURED  AGAINSTthe  business’s  assets ADVANTAGES DISADVANTAGESNo  security  required Interest  rate  is  usually  higher  (because  of  the   extra  risk  to  the  lender)
  25. 25. Enjoy  these  FREE  NOTES They’re  part  of  the  new   HSC  Business  Studies  CRAM  app   FINANCE   The  app  includes  THREE  AND  A  HALF  HOURS of  videos  and  visual   explanaIons  of   all  the  most   important   parts   of   the   topic   that   you   can   take   with  you  wherever  you  go. To  stay  up  to  date  on  the  latest  updates,  Like  the  Facebook  page   h?ps://www.facebook.com/HscBusinessStudiesCramApps)The  Finance  App  will  be   available  on   July  26th,  2012 h?p://itunes.apple.com/au/app/finance-­‐business-­‐studies-­‐cram/id545069870?ls=1&mt=8
  26. 26. 2.  INFLUENCES  ON  FINANCIAL  MANAGEMENT External  sources  of  finance Debt  sources 2.  LONG-­‐term  borrowing iv.  LeasingLEASE  (“rent”)  assets  e.g.  equipment  e.g.  buildingsinstead  of  buying  them ADVANTAGES DISADVANTAGESTax  advantages The  business  doesn’t  own  the  assetGives  the  business  access  to  property/ The  total  cost  over  the  Ime  will  be  higher  than  equipment  without  the  lump  sum  payment   if  they  paid  upfront.(which  frees  up  money  for  other  needs)

×