Page 5: Building the cash base
Any business that wants to grow must secure the necessary funding. There are several sources of cash funding for a public limited company (plc). It can:
- sell further shares to existing shareholders at an attractive, discounted price
- raise funds from loans (where the borrower pays interest and eventually the principal) or from short-term borrowing in the form of a bank overdraft. This results in a heavy burden of interest
- generate and plough back profits. This is a really attractive option. Profit is internally generated cash that is the reward for making the assets of the company work more efficiently.