Evaluation Performance Evaluation Performance Essay Sample

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This paper will focus on Acme looking how to increase funding for Greenfield investment abroad, and how multinational enterprise funding can be very demanding and complicated process. Acme will be looking at the various internal sources of funding like accounts receivable, inventory reduction, line of credit, mortgages loans, well as short term loans and equity offering.

With the variety methods of funding that can be done to attained conservative loans. The MNE main focus is on external sources; which it explore growth capital, equity offerings, bank loans, lines of credit and mortgages (Brigham & Ehrnhardt, 2011). The internal source focuses on debentures, lines of credit, and long/ short term loans. Long Term Loans

Long term loans are a loan that required repayment in a series over one or more years and can be repaid annual, semi-annual or monthly payment. The purpose of long-term loans is when business needs to make capital improvement for example, buying large pieces of equipment for manufacturing process. Many long term loans can be setup so that the interested rate can vary according to the market. Which allow businesses to better manage their short term resources without occurring obscurity; in addition, they will be able, to extend the cost of the project as company negotiate a fixed interest rate. It should be denoted that these funds that the interests accrues are tax deductible and will reduce the company’s equity, as well.

In regard to long term loan repayment, it is important that the company understand how much monies they can afford to pay back according to type of loan they have chosen. The investors must be comfortable with the type of loan they enquire such as i.e. balloon, equal principal payments, and annual or semi-annual. One of the largest disadvantages of this type funding it requires that company provide collateral; which could have barring on the company resources until the loans paid in full, and it can put the company in potential financial risks and reduce their security standing (Brigham & Ehrnhardt, 2011). Short Term Loans

A short-term loan is defined as a loan that only needed for a one year period, and the interest is calculated daily. Business will have the opportunity to pay less interest, and a small amount of costs. In other words, when the term of the loan is short there will be fewer obligations, less interest paid to create a larger savings relative toward long term loan. It is also a method that a business uses to address their cash flow needs. The biggest disadvantages of lending institutions charge a higher interest rate on short term loans (Brigham & Ehrnhardt, 2011). Debentures

A bank debenture is a financial tool that is issued by a bank to investors as a method to raise capital. Banks that issue a debenture mean that they agree to make regular interest payments to investors on a loan that basically come the investors to the bank. There are some types of debt that can be unsecured that don’t’ require any collateral or assets for these loans; many of them are secure by the credit standing and reputations of those investor’s. However, there are some debentures that does require companies to provided secured assets, this allow the investors to have some control over their asset (Andrus, 2009). Therefore, legally the business cannot sell or used for collateral with any other investor without the permission of the debenture holder. The advantages of debenture provide a higher rate of return; the banks use it to generate more funding and money is owed to investors and not tied down. The disadvantage of debenture is that the funding revolves around the cost of at the end of business lending period. Lines of Credit

Lines of credit are a bank moral commitment to make loans to businesses by banks and other suppliers for specified amount for a certain period of time. A bank line of credit will allows business a quick method to access capital. This is another form of external funding that can avoid red tape that is generally associated with loans that are long term. Now, when comparing to other types of funding, it provides business with a low interest rate and processing fees that tax deductible. The disadvantage with a credit line is that the business will incur heavy financial risk; and make it subject to loan cancelation by the lender (Baker, 2007). Moreover, the process could be easily abused by businesses that can lead to a larger financial risks or the lender can ask for full payment. Supplier Lines of Credit

Supplier line of credit allows business to acquire merchandise or supplies with a promise of payment at a later date. When a company has good relation with their supplier it is this types of external funding that allow them to manage and finance other funding mechanisms. Businesses are required to make timely payments in order to build a strong relationship with their investors and suppliers for future business. Equity Offering

Equity offering is an invitation by public company or a select group of investors. It is from the sales of company stock that allow them to have access to capital that will support their financial activities. This method of mechanism funding will decrease the company financial risks; because they don’t require periodic payments and interest is not accruing, which provide them economic steadiness. Usually, business used the monies that was generated by mechanism is mainly used to fund research and development, to aid in operation, growth expansion, and pay off debt and push forward on new projects. The disadvantages with equity offering involve high set up costs; and the dividends want be tax deductible, and it will dilute the business equity. Conclusion

As the Chief Operating Officer of Acme view the above information as they look toward making a proposal for an overseas production facility. It is my recommendation that Acme uses a combination of external funding tools to aid in their decision making process to determine if a secondary equity offerings would generate the necessary monies to fund the acquisition and how to get the most effective cost and most efficient way to increase the company finances . In addition, it is important to denote that this needed to be done in a balance manner. Acmes would need to negotiate with their suppliers a line of credit, with deferred payments of one year or less without any consequence of default penalty. This will allow Acme enough time to acquire the supplies and raw materials they need and put them in a better position over their capital to finance other aspects of their overseas operation.


Andrus, E (2009). What are the advantages and disadvantages of debentures? Retrieved from http://whalehookloans.com/2008/01/02/what-are-the-advantages-and-disadvantages-of-debentures/ Baker, A. (2007,). Advantages of Short Term Loans. Retrieved from http://ezinearticles.com/?Advantages-of-Short-Term-Loans&id=735914 Brigham & Ehrnhardt (2011). Financial management: theory and practice. Publisher Cengage learning

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