Nantucket Nectars Essay Example | Topics and Well Written Essays - 500 words

Nantucket Nectars - Essay Example Another source of short term finance is life savings. Tom and Tom with their lifetime savings of $17,000 were able to undertake some expansion. Like Nantucket Nectars, entrepreneurs like Tom and Tom did can borrow funds from local financial institutions or individuals. Short term borrowings may be in form of overdrafts with limits set by banks and interest charged at variable rates set by the banks. Short term loans may also extend up to a period of three years; such sources of cash do not require much collateral, hence easy access. Before short term lending is extended to firms’, factors such as purpose, amount, repayment period, term and security are considered and ascertained (Pride, William, Robert 2011). As a matter of urgency if deemed so, a company may welcome wealthy individuals who pump money into the business at the exchange of a percentage of shareholding. The sales director of Nantucket nectars advises that mike Egan be allowed to bring in $600,000 for the exchange with 50% of the company. Out of the companies profits it can decide to plough back some amount to grow the business in form of retained earnings. Though this means has a direct impact on dividends since it reduces the amount earned by shareholders hence they may complain (Pride, William, Robert 2011). Retained earnings are attractive sources of cashing in since managers think they don’t cost anything, it is at their discretion to make dividend decisions. Also retained earnings as opposed to issuing new shares help the firm to evade issue costs and this method also helps the management avoid change of control. Another factor which facilitates the consideration of retained earnings is the financial and taxation levels of the existing shareholders. If due to taxation, they would receive capital profit realizable only during taxation of shares sold than receive current income then retained earnings is preferred to other methods. Businesses can still cash in