Financing decisions
Investment requires finance, and there are many sources available. This part
of the book considers how decisions are made on the most appropriate
sources to finance particular investments.
Chapter 8 reviews the principal sources of finance and their particular
features. The role and effectiveness of the market for finance is discussed in
Chapter 9. Here, the theory that share prices always reflect the economic
reality is examined in some detail. In Chapter 10, assessing the cost of
finance is examined. The relationship between the investment and the
financing decision is also considered. Chapter 11 is concerned with the
extent to which it is likely to be beneficial for businesses to borrow funds
as an alternative to raising them from shareholders. Raising funds from
shareholders can be done in, broadly, two possible ways. These are
ploughing back past profits, instead of paying them to shareholders as
dividends, and raising fresh money from shareholders by asking them to buy
new shares. Chapter 12 considers which of these two approaches, if either,
is likely to be the more appropriate.
PART 3