For questions and
answers, email theotherwomaninmarriage@gmail.com
QUESTION:
In your opinion, will
small businesses continue to survive in Nigeria, will big businesses eventually
swallow them all?
ANSWER:
The small businesses
will continue to survive in Nigeria due to the contribution to the development
of the country. The social importance of
small business is attributed to their influence in stimulating indigenous
entrepreneurship and technology.
A social contribution
in small enterprises is the transformation of traditional sector has served and
continued to serve as the springboard for lunching into a vibrant modern
sector. Economically, small enterprises assist
in the dispersal of economic activities by encouraging the development and
modernization of these activates outside the metropolitan areas.
Another economic role
of the small enterprises is their ability to mobilize financial resources,
which would otherwise be idle or untapped by the formal financial sector. Despite the economic advantage over the
small, both will continue to co-exist due to the following roles of the mall
businesses.
1.
They provide a good training ground
for entrepreneurship
2.
They are more labour intensive and so
create more employment opportunities
3.
They are less complex in terms of technology
and therefore can be manage by the entrepreneurs themselves.
4.
They are likely to utilize local raw
materials thus conserve foreign exchange.
5.
They are likely to provide the
linkages between larger enterprises and local producers of basic raw materials
QUESTION:
How can a prospective
small business owner/manager go about evaluating the finical picture of the proposed
enterprise? Briefly incorporate the following terms into your answer.
a.
Type
of Capital (b). Source of Fund (c). Use of Fund (d). Cash flow
ANSWER:
A good knowledge of
the types of capital and how to source them should be known by the entrepreneur
so as to know how to maximize them.
There are two categories of capital namely:
1. Equity
Capital, this is the investor’s own capital that is the worth of his contribution
to the organization or the venture.
2.
Debt capital: This is the type of financing that involves a
loan to be repaid, usually with interest.
Debt capital can be divided into three types, namely, SHORT TERM LOANS, MEDIUM TERM LOANS, AND
LONG-TERM LOANS.
SOURCE
OF FUNDS
The source of funds
can be categorized into internal and external.
i.
THE
INTERNAL SOURCE FOUNDS: Retained profits, promoters of
the business revenue reserve, account receivable etc.
ii.
EXTERNAL
SOURCE OF FUND INCLUDES; Short term bank loans, trade
credit, bill of exchange, hire purchase, lease, sales of shares etc.
USE
OF FUNDS
The money obtain from
various sources is to cover expenses of the business and to acquire new
assets. Some financing needs are related
to day to day operation such as meeting the paying of rent, production facilities,
buying of equipment, Staff Salaries, Advert, etc.
Note students; take
example, if you own a company, what will be your expenses of running the
company? That is what this question is all about.
CASH
FLOW
It is important to
always prepare a cash flow forecast when everyone wants to start a new
business, expand or change an existing one.
This is the determination of the amount of cash coming in (Cash flow)
and going out (outflow) within a particular period e.g. one year.
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