P4 Describe sources of internal & external finance for Debenhams
Write a paragraph to answer each of the following:
• Refer to Debenhams
• Provide at least two reasons for each
1. Why may a bank overdraft be more beneficial than a bank loan for Debenhams?
The main reasons why overdrafts would be beneficial for Debenhams is because it has allot of flexibility and you can basically change the amount borrowed within the limits and carrying on the interest is paid only on amounts borrowed. The reasons why I wouldn’t recommend loans are purely because it’s less flexible than the overdraft option there is a like deadline that needs to be met for them to pay the bank loan back. With loans Debenhams has to pay back or they ...view middle of the document...
Carrying on the investors might buy the company or even a product that can increase in value or make the business grow. Taking the risk is potential for a greater investment in return. If the investor has a financial goal with long term aims, the investor will make more money by carefully investing in higher risk assets such as stocks or even bonds. The reason why investors, instead of saving their money they invest so they can make profit by waiting for the value of their investments to grow. The most common way to invest in a company is to buy stock, which represents a portion of ownership in the company. The other reason is Diversification of investments raises to putting your money into several different types of investments to spread out your risk and improve your chances of earning profits. Lastly the benefits are that if they do invest in a company like Debenhams then you will have control in the business and support from operations. Investors would want to invest in new technology which would expand the business
3. Why are shares considered a long-term investment?
The reasons why shares are considered for long term investment is because it will save you other expenses, like transaction costs from trading. Long term investing is basically found in the relationship between volatility and time; investments are held for longer periods so basically its lower volatile than shorter periods. The longer shares are held in long term investment, the more likely you will be able to either low market periods.