Financial Planning

Financial Planning

Introduction

Capital is the essence for the success of ventures. Ventures need to use capital to run the business, such as product purchases, shop rent, to make profit, and even need more capital if engaged in a large number of commercial projects. Capital is enterprises' blood, driving force behind economic activities of enterprises and sustained impetus. Therefore, effectively raising capital is an important factor for the enterprise creation, survival and development. However, as the main body involved in a dynamic environment, enterprises will encounter more varieties of financing instruments and more complicated financing environment.

Cash is a vital resource for organizations. To maintain financial stability, the organization must have enough cash to operate the activities. Cyclical and seasonal fluctuations also affect the funds of the organization. Organization must plan when cash flows are generally lower than the cash outflows. The overall objective of cash management is to make sure that there is enough cash to pay the expenses (Anthony and Young, 1994). Cash and investment management is done through the statement of cash flows and cash flow forecast and budgeting.

Source for Funds

Partnership

The partnership for raising funds include individual partners who are equal in their contributions for the business and the partnership is governed by the Partnership Act 1890. The partners will divide profits or losses equally, to operate on the basis of any agreement between them. The agreement or contract does not need to be written. The partners share the rights to make decisions and share ownership of assets of the business, including the share or responsibility of debts and obligations of the business without any limit. If one partner fails to pay their share of debts, the other partners must pay that partner's share of debt (Adams, et al. 2007/2008).

The advantages of a partnership include that it does not have any formalities in setting up, such as the Memorandum and Articles, registration, publicly available accounts or other details. Partnership does not require any written agreement or prescribed roles of the partners who are also known as members or directors. According to Adams et al. (2007/2008) this means that the internal management of the business is fluid.

The major disadvantage of partnership is the unlimited liability for debts of partnership both jointly and individually. Partners could become bankrupt and lose their possessions because their partners are unable to pay the debts of the business. Partnership may find it difficult to raise capital because it cannot issue debentures, in which case partners will have to contribute personally to any capital demands on the partnership (Ehrhardt & Brigham, 2008). In the case of a partner leaving the business, the share for the leaving partner will be bought by the remaining partners by raising their own money. However, there are few formalities in forming a partnership, which indicates that it requires lesser expense and marketing efforts than a company (Adams, et al. 2007/2008).

Funding Alternatives

In this partnership, each of the four partners is entitled to pay equal amounts of cash as funds ...