unedited paper By David Vaughn

Apply signature assignment: Financial Horizons

David Vaughn

Phoenix university

Fin/571

10/6/2020

James Traylor

Apply signature assignment: Financial Horizons

             The goal of any company is to make money while providing goods or services, but how is this done? The answer may be through strategic planning based upon the industry. The plans are put into action and carried out into what will be turned into goods and services. No matter the department, each is handled through a network of plans. This paper will discuss financing those plans.

Why is funding needed

            In the industry I chose, the capital and competition is high and at times money can be scarce. With choosing the internet and with it being very competitive because of it’s broadness. The market and capital can vary and unless you have solidified the success of networks for your company. You may see many changes and inconsistencies. Trying to Rely on outside sources for marketing, hoping to enlighten newer audiences while maintaining brand loyalty through consumers can become challenging.

            This leads to questions of financial security or liquidity. What are my assets and liabilities? Do I have sunk cost? As A start up these questions are present and visible. Not just is it clear That I have a short list of sunk cost (bills, miscellaneous inventory) my assets themselves are my personal capital. My marketability and profits depend on month to month decisions. My need or (want) for funding effects my financial future. Those needs or wants could lead to uncertainties which can become a firm risk or unsystematic risk (Brealy, 2020). How can this change I asked, I wanted to be self-funded and singularly operated.

The sources of funding

             With being the sole-proprietor my initial funding of course starts with my own capital. With not much planning I started a few (.coms) I tried to stay a few years ahead or month to month. Trying to Keep my finances manageable I feel that borrowing Was not necessary and would only hurt me at this stage. The definition of Borrowing is,  “To receive money from another party with the agreement that the money will be repaid” (Borrowings financial definition of borrowings, 2020).

            So as I continue with borrowing, I find that according to (business term loans, 2020) “the interest rates can vary with the amount borrowed along with the structuring of the loan.” I feel that this will only increase my liabilities and sunk cost. Which means excessive borrowing must be avoided if I plan on having a secure firm and financial future.

            As a start-up company that is beginning in new areas within the internet market. I want to begin with the least amount of debt as possible and by using my own limited capital or (equity), I think that is the surest way to decrease debt. I want to avoid stretching payables: delay payment of certain liabilities (Brealy, 2020). At this stage it would be a poor financing decision.

            As I Looked over current rates for loans with a short-term forecast finding one seemed unlikely. With my first search  saying “the time to repay the loan could vary along with interest rates (business term loans, 2020)” and with time frames that could be within 10 years with a minimum or max loan amount of $10,000. This definetly was not short-term and could lead to many uncertainties making this an unviable option. What were my options?

             Discussing equity and venture capital with possible angel investors. Equity can be described as “ shareholders’ equity (or owners equity’ for privately held companies), represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debt was paid off (Equity, 2020) .” I described it as all of the owners available assets.

            This describes the types of capital that I may have or look to receive. As a company I have stated that not only would I want to keep borrowing to a minimum I would begin with a limited amount of self-funded start-up money (equity). My original plan which means that the likely hood of finding “Angel investors” would be unlikely because I do not search for them. That is unless they were to become familiar with me through marketing channels and would pay for my services. Making them clients and becoming a part of the accounts receivable. In turn changing the available forecast for my funds and decreasing the likely hood of needing a small business loan.

Choices in funding and forecasting horizons

             A quick look on (money, 2020) which showed an ad. Apr rates were considered to be 2.40%, what does this mean and how is it calculated? Not including the supposed average savings of $34,000 that was a prerequisite. With the principle amount being $15,000 and the rate 2.40%. Looking at it quickly I see ($500/1.024/4) gave me the amount of interest ($122.07) I then added that to the figurative example $500 + $122.07 subtotaling as $ 622.07 or $2488.28 (four quarterly payments of $622.07) for the year. Which may not be the way you would calculate the interest and loan repayment amount. I wanted to get a different look calculating APR and additional rates.

            To calculate APR accurately I visited two websites. While visiting the websites I discovered according to (Song, 2020) that “ Due to the reduced eligibility criteria, online lenders are generally a better option for businesses or borrowers that are un-bankable—such as startups, low revenue businesses or applicants with lower credit scores.” All of which I may have been considered. I still wanted to look over the chart that provided the leading lenders. I chose from that list “American Express” which provided rates of 6.98% to 19.97% APR.

            With this APR it may be easier to see how to calculate but yet there was more information that spoke of varying issues that may effect the interest rate or fees. Not only was a credit score an issue for some but the types of fees associated with such loans (like late fees). Which was expected, but interestingly enough the idea of stretching payables may be frowned upon when searching for a lender. So, how can I calculate this APR if it is approved with all of the additional fees? Keeping in mind I want to keep debt to a minimum.

            After approval and the fees are assessed the APR is calculated this way; (1) Add up all interest charges and divide by the amount you borrowed or currently owe. (2) Multiply by 365. (3) Divide by the number of days left in the loan (how to calculate apr bing search, 2020). This does not fit the criteria of my financial plans. The horizons for such calculations could be years for repayment.

            Not just were the amount of loans very high the time frames in my opinion were not very realistic. That concluded my idea of searching for a loan. Because it was doubtful that they could be used for short-term financing and month to month activities.

Direct cost what can I expect at this point? I feel that in order for my business venture to be successful. I must forecast for the immediate future. Not thinking to much beyond the coming year I want to place a financial plan together but the assignment calls for me to plan for an additional three years. To get things in a working order I will create a chart to correspond with the direct cost or ideas discussed. The following will be a financial planning model.

            (Brealy, 2020) says the first step will be to create a financial statement. The second will be to identify key relationships (planning model), and the third being to create a (pro forma) the sources and uses of cash. It may look this way;

Year 1 Bills $21384 Labor $300 Inventory (miscellaneous) Cost of goods sold $800 Marketing cost $2000 Accounts receivable $18000 Total assets -$4884Year 2 $21384            0   $600 $3000 $18000 -$5784Year 3 $21384 $900   $0 $1200 $18000 -$5484

             I wanted to first create a financial statement, even though the numbers looked as if I will lose a substantial sum each year. In reality it seems worse than it is, one reason is because I am modestly changing the accounts receivable. Making the bills (sunk cost)  higher than I would pay. Secondly, I understand my inventories vary and could be considered apart of my bills I do not pay a inventory cost that is that large. My marketing cost was accumulated by how much time I spend marketing my companies. In reality it has no actual dollar amount but time is money. In this circumstance I will say that I have not yet been paid for my services. This was only to forecast and prepare for step two.

             Identifying my key relationships, in turn effecting the maintenance and overall business relationships. That in turn will change labor cost by showing the different ways labor will be necessary or by showing the different ways my capital will spend. Increasing my marketability through networks while developing relationships and functions. Decreasing or increasing capital (debt to asset ratio) (Brealy, 2020) or showing the when or how that expansion is necessary.

            The final step in the financial plan model (Brealy, 2020), is to allocate the funds that I propose the company will make. In a realistic setting My money would go to bills and the necessary functions to remain operable. Here they are The cost of music (varies), The time allocated towards programming and engagements (priceless), and the miscellaneous items or services that arise (varying).

Conclusion

            The hopes of creating a lucrative operation may take careful planning of networking and finances. Seeing which horizons that fit for your company takes the successive timing of those plans. In my scenario it does not take extremely large amounts of capital, but the plans must correspond until a larger expansion can be forecasted. The percentage of expected growth is merely a idea at this point because of my company being a start up. I could see that the sunk cost were there but not the exact amounts of receivables. An accurate forecast will take some time not just in the industry but for my networks also. Seeing step two of forecasting as a important part of the plan.

Published by David Vaughn

I am finishing up my Graduate degree in maybe 2020 or the middle of 2021. This is my first website and now I have a radio station connected to it. The radio station is fanbaseradio and is apart of another website I now own. I am hoping to continue to grow my network and develop a marketing firm. kewlbeer'd marketing affiliate of fanbase.

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