Financing a New Product



Financing a New Product

Introduction

Financing a product or service project is one of the crucial decisions for an organization. Generally, there are three major types of funding options available to businesses. These are debt financing, equity financing and grants. The debt financing refers to the availability of credit or loans to the small businesses. A business that has a good credit reputation in the market will not find it hard to get the required amount of credit. However, this cost of borrowing money has to be compared with the cost of equity financing for cost benefit analysis. Equity financing for a small businesses may mean as one coming from friends and family and those that can be attained through angel investors. This also includes the venture capitalists (DeFusco, 2007). Grants refer to the money that is got through a state or a regulatory authority for small businesses. These regulatory bodies usually provide grants to small businesses in an attempt to facilitate their operations and boast the economy as a whole. Each of the options discussed here has its own pros and cons and hence, it depends upon the company's financial manager how financing decisions are taken.

Scope of the Paper

For this paper, the analysis will focus on the financing for newly launched product Iphone 5 by Apple Inc. The organizational structure of the company is made is such a way to be more competitive even in today's dynamic environment.

The paper would evaluate how the company financed its newly introduced product and what were the alternative options available. Based on the evaluation, the paper will suggest recommendations to different financing options and its risks.

Discussion

Iphone 5 is a family of Smartphone introduced by Apple Inc. In particular, the iPhone falls into the high-end aspect of the Smartphone market. Iphone is a family of smart phones with wireless multimedia Internet, capacitive touch screen and few physical buttons designed by the company Apple Inc. The product was presented on 12 September 2012 at the Yerba Buena Center for the Arts in San Francisco by Tim Cook. During the event, Apple announced the iPhone 5 in effect and also presents new models of the iPod Nano and the iPod touch. Pre-orders were scheduled from September 14. More than two million pre-orders are recorded twenty-four hours , and more than five million units sold in the first three days after launch, breaking the record held by its predecessor, the iPhone 4S (Apple Inc Annual report, 2011-2012).

Financing

If we look at the financial of the company, the annual reports of 2011 and 3rd Quarter of 2012 reveal that the company does not have many liabilities. It is observed that the company has been financing its project with internal funds in the long term; it is able to generate revenues to an extent that it can very well support its Research and Development expense and come up with new products. Internal financing is the provision of funds for a business through retention of past profits in business, the ...