Finance

[Name of the Instructor]

Finance

The following are the answer of the questions regarding the financial management of a small and a large corporation. These questions will provide an analysis of how the financial decisions of a small firm differ from that of a large firm. These answers are:

Financial Ratios are an important tool for a small and a large corporation as it enables them to analyze the performance of their business over the years. It helps all the organizations in finding out the asset management in their business, what is the percentage of profitability of the business, how much the return from the amount is invested by the owners and other investors and etc. There are several kinds of ratios that a firm can collect according to the items included in their financial statements. The financial ratios important for a small firm includes the profitability ratios that enable it to measure the performance of its assets and how much return do they earn, second is the liquidity ratio that calculates the debt paying ability of a firm and third is the leverage ratio which analyzes the methods of finances within the financial obligations that can be opted by the small business owner in order to expand their business. As compared to the three of the above categories of ratios that will be needed by the manager of the large corporation but it will also require market ratios which will help him in analyzing the response of the investors, performance of the shares of the company and new opportunities to issue stock. These are the different ratios that will be important for a small business owner as compared to the important ratios required by the manager of a large corporation.

Debt Financing is a source of raising funds through lending money from a financial institution and that the amount borrowed will be returned with the amount of interest after a specific time period. There are some advantages and disadvantages of using debt finance as a source of fund for the organization. The advantages of debt financing are: 1) the borrower of the money does not get ownership of the firm, 2) there is no responsibility of the lender on the borrower except for paying back his money at a specific time period and once the money is paid back the relation between the borrower and the lender ends, 3) interest paid due to debt ...