Financial Management CIA-1.2
Financial Management CIA-1.2
Financial Management CIA-1.2
CIA1.2
The model for profit making will be unique and the clothes we sell be different on the human’s skin.
We will introduce different types of clothing based on the sport. So basically, we will focus on the
sport played and material. As sports is slowly becoming an essential part of everyone’s life and
sports workouts cannot be done in regular clothes. We are focusing on the sweat winking fiber and
actually the clothes prove to be useful. The rising economy and shifting lifestyle choices have forced
Indian consumers to become more health-conscious and incorporate new health and wellness habits
into their already hectic lives. The large multinational companies, rightly dubbed the "Big Four" -
Reebok, Adidas, Nike, and Puma — have long dominated the Indian sportswear industry.
The company will require funding for all the following purposes: Collection prototype, Product
development, website/app development.
Development Team
Marketing Team
Raw Materials
Research and Development cost
Licenses
Working Capital
Testing Team
Office Space
Manufacturing Unit
Customer Service center
SYMP is just a brand which is launching slowly in only 2 cities. The company will focus on raising
money through Equity and Debt Financing through the medium of angel investors, small
venture capitalists and Loans.
Internal Equity – This is a type of equity where it is primarily owned by the Founder/Owners, their
spouses and family members and employees of the organization. This will be used at the primary
financing method to raise internal equity.
External Equity – The company here will raise equity financing from other business, investors,
government, public, venture capital and any other sources. This will be the way used to raise the
external source of equity which will be helpful for the business during its initial operations.
Internal Debt – The company will take loans from family members, close relatives or the employees,
borrowings from other sources. Also called as internal financial obligations.
External Debt – Business will take debt from other business. There are different typed of debt
provided by government. Basically commercial banks is what we are talking about. SIDBI, provides
loan under stand up India. Repayment of this loan can be upto seven years.
Factors to keep in mind while constructing capital structure –
1. When the company is raising through equity the business does not have to pay back the
money, but when we are raising money through debt there is a fixed period of time where the
business has to repay to the creditor.
2. Because the unpredictability of a company's profitability is higher, a company with high
business risk prefers to maintain low debt levels. The larger the debt proportion, the greater
the company's financial risk in terms of fixed costs and timely repayment of principle. My
business is a high-risk high reward business.
3. A company's earning capacity should allow it to produce enough income to cover its cost of
capital and fund future development. Because debt holders are guaranteed a set rate of return
and repayment of principle during the maturity term, the cost of equity is often greater than
the cost of debt.
4. Interest paid on the loan is tax deductible, increasing earnings. However, because it is a start-
up, it will have a lower creditworthiness, making it harder to acquire cash through loans.
Despite this, the firm was able to raise Rs 5 crore through loans.
5. Financial leverage, often known as "trading on equity," is the use of fixed-income securities
such as debt and preference capital in conjunction with owners' equity in the capital structure.
In terms of financial considerations, this is the most crucial decision.
6. The capital structure will be directly influenced by management's attitude toward keeping
control of the firm. Existing shareholders may not support the issuance of new equity shares
if they desire to keep their stake in the firm the same. The interest and holding over the firm is
reduced when new equity shares are issued.
7. The current taxation system favors debt over equity capital since interest on bonds is a tax-
deductible cost, whereas dividends are taxed. Although it is impossible to predict future
changes in tax rates, there is little doubt that they will be reduced.
Division of Capital –
1. Factors Affecting Capital Structure Decisions. (2019, February 4). Essays, Research Papers
and Articles on Business Management.
https://www.businessmanagementideas.com/financial-management/capital-structure-
decision/factors-affecting-capital-structure-decisions/18907
2. Under Armour Inc C (UA) Balance Sheet - Investing.com India. (2021, August 12).
Investing.com India. https://in.investing.com/equities/under-armour-c-balance-sheet
3. Wikipedia Contributors. (2021, August 9). Under Armour. Wikipedia; Wikimedia
Foundation. https://en.wikipedia.org/wiki/Under_Armour