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  • Subject Name : Management

Feasibility of Raising Funds Through Intra-Corporate Sources

Michael Norton, President of the Liberty enterprises requires funds to expand his business which specialises in the making computers and the related peripherals. But obviously in order to expand the business each and every business man requires large amounts of funds in order to meet the growing demands which the company has in the market in order to maintain a continuous and consistent supply of their goods and services. Now the question arises that whether Liberty Enterprises is in a position to raise funds through intra company sources. Now currently, as he needs to access more of working capital in order to expand the business. The company should consider every possibility to gain working capital. Now if the company uses the intra company sources it will enable them to improve their trust and confidence between the investors as well. In addition to this, another advantage will be that the company would not have to pay interest on the loans if it raises the funds from external sources either via banks or by issuing debentures. So eventually it gets saved from paying a hefty amount of interest along with the principal amount of loans. (UNCTAD, n.d.)

The methods which Michael can use for transfer of funds within Liberty Enterprises include:

1. Retained Earrings: Michael can invest the amount which is left after paying to the company share holders and investors as profit he can again invest that for expansion of business. (Investopedia, 2020)

2. Loans via banks or financial institution: Michael can also raise funds by borrowing from banks or financial institutions the amount on a certain rate of interest for a specified span of time which the company will repay later on. (BC Campus, n.d.)

3. Selling Shares: If the company sells its shares in the stock market to the prospective shareholders it will be able to raise funds for the business.

4. Issue of Debentures: Michael can raise funds through the issue of debentures. Wherein debenture holders are acting as creditors to Liberty Enterprises who will receive interest on the amount lend to the company.

5. Increase in Investments by the investors: If the investments are increased and if the company attracts more and more investors towards it. It will automatically increase the funds in the company for expansion of business. (Business Management, n.d.)

Michael should know about that multilateral netting is an arrangement of payment among various groups and parties that the transactions should be added instead of settled one by one. It can happen within the business company itself or amongst various parties. When this is being used all the parties involved send their payments to one particular netting center and from there it is sent to the various parties. (Investopedia, 2020)

References for Feasibility of Raising Funds Through Intra-Corporate Sources

BC Campus. How businesses raise financial capital. Retrieved from: https://opentextbc.ca/principlesofeconomics/chapter/17-1-how-businesses-raise-financial-capital/#:~:text=Firms%20can%20raise%20the%20financial,how%20to%20pay%20for%20them.

Business Management. Sources of finance: Internal and external | Industries. https://www.businessmanagementideas.com/financial-management/sources-of-finance-internal-and-external-industries/10548

Investopedia .(2020). Multilateral Netting. https://www.investopedia.com/terms/m/multilateral-netting.asp

Investopedia .(2020). Retained Earrings. Retrieved from: https://www.investopedia.com/terms/r/retainedearnings.asp

UNCTAD. Definitions and sources. Retrieved from: https://unctad.org/en/Docs/wir2007p4_en.pdf

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