Key Business Considerations

Key Business Considerations

You must choose the right structure for your business. Determining the legal structure of your business is one of your biggest decisions when starting up. Products or services may require mandatory adaptations to meet the technical requirements, safety standards, or local regulations.

The key business considerations: The key business consideration which is relevant for the project financing decisions are:-

(10 Cost: In general the cost of debt funds is lower than the cost of equity funds because the interest payable on debt capital is a tax-deductible expense.

(2) Risk: The main sources of risk for a firm are the Business risk and financial risk. These are as follows:-

  • Business risk: Business risk refers to the variability of earnings before interest and taxes and arises mainly from fluctuations in demand and variability of prices and costs.
  • Financial risk: Financial risk represents the risk arising from financial leverage.

(3) Control: From the point of view of the promoters of the project, the issue of control is important.

(4) Flexibility: This refers to the ability of a firm to raise further capital from any source it wishes to tap to meet the future financing needs.