Question

why does a financial manager need to choose which source of financing a company should use? what do they need to consider in making this decision​

Answer 1

Answer:

there are two types of sources for it one of this is equity means owner's fund and other one is debt means borrowed fund

factors that has to be kept in mind :-

flotation cost :-> the cost incurred for raising fund through borrowed fund is lower as compared to owner's fund

flexibility :-> the borrowed fund is flexible as compared to owner's fund

risk :-> higher risk is concerned with the fund raised through owner's fund

tax payment :-> lower taxes should be paid if the fund is raise through borrowed fund dur to regular obligation of interest payments

Answer 2

The financial manager of a company has various functions and responsibilities while raising the funds for the company.

• In order to keep the business going the company must have enough cash and liquidity.
• It is one of the biggest functions of a financial manager to decide the ratio between that and equity. He needs to make sure that he maintains a good balance between the dead and equity.
• His other functions include estimation of the right amount of capital which is required for the company and management of cash. He also controls the finances of the company and helps to utilise the resources in an optimum manner.