GotoHolidays’ Financial Strategy: Internal and External Sources of Financing

Business Finance

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Introduction

• GotoHolidays’ Financial Strategy: Can compile both internal and external sources of financing.

• Importance of Internal Sources: Operating profits are reinvested for the growth and stability of the organisation.

• Role of External Finance: The sources of finance for the expansions include bank loans, equity finance, and trade credit.

• Strategic Balance: This way the costs are covered and there is no extra spending, while there is additional support in funding innovations.

• Objective: Revenue control to boost the lasting success of the tourism business and flexibility.

Notes:

To understand GotoHolidays’ sources of finance, let us unravel the model in the next part of the presentation. Thus, whilst retained earnings, and even further, its reinvesting enables for sustaining and growth of the financial resources, the such use of external funds sources, such as bank loans or equity finance, results in a balanced approach to managing financial resources, given the environment of high competition.

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Finance Function:

• Finance as a Core Business Function: Fundamental to the day-to-day functioning and organisation planning of the firm (Sukenti, 2023).

• Management of Funds: Responsible for the management of funds that are required for the running of day-to-day operations and future expansion.

• Efficient Resource Allocation: Ensures the resources are well utilised to get the maximum returns while incurring minimal losses.

• Support for Decision-Making: Gives important results regarding the financial situation and helps make decisions within the enterprise.

• Impact on Profitability and Sustainability: Informs the well-being of the company, its profit margins and sustainability in the relevant industries.

Speaker Notes

Finance is highly relevant to GotoHolidays because it will help organise and distribute funds well, allowing for the financing of our working processes as well as future growth. The finance team is also closely involved in the decision-making process since they help supply us with essential finance data for decision-making. The effect is the reduction of revenue and profitability with obvious consequences for the organisation’s position within the tourism market.

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Relationship with other functions

• Interconnectedness of Finance: Finance communicates with all the departments to realise conformity in operations.

• Support for Marketing: Promotions to increase the profile of television in people’s ways of life in the course of marketing campaigns and within a specified financial threshold (Evans, Bratton and McKee, 2021).

• Collaboration with Human Resources: Handles matters of wage and incentives for the employees to get the best out of them.

• Partnership with Operations: Jointly deal with cost containment and enhancement of operations efficiency.

• Strategic Contribution: Responsible for producing the necessary financial reports that would give an outline of potential financial strategies.

Speaker Notes:

In GotoHolidays the finance department operates closely with other production departments. It promotes marketing by providing adequate funds for media adverts as well as the promotion projects that are necessary for the marketing results. In human resources, finance controls the funds of employee compensation and other benefits which leads to the encouragement of productivity, among employees. There is a synergy with operations that enables a check on the expenses and at the same time optimises the operation process.

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Internal sources:

Definition of Internal Sources: The money that is raised from internal business activities Refers to internal findings or internal finance (BBC, 2024).

Speaker Notes

In the case of GotoHolidays, internal sources of finance are important, especially in enhancing flexibility in financing operations. The main illustrations are retained earnings, through which profits generated are reinvested into the business and the sale of assets. Such internal funds are cheaper since no external credit and corresponding interest charges have to be made. Even though internal finance means that the study can quickly regain the money required for decision-making for a short-term nature and less exposure, concluding that it strengthens the competitive position in the tourism market.

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Internal Source of Finance Example

• Retained Earnings (Gregova et al., 2021).

• Sale of Assets

• Owner's Capital

• Reduced Need for External Borrowing

• Immediate Access to Funds (Research Gate, 2019).

Speaker Notes:

Therefore internal sources of finance are very essential to the funding of GotoHolidays. Retained earnings mean the study can continue to invest in the business instead of distributing profit in the form of dividends. Further, selling non-performing assets such as equipment and properties that are obsolete also triggers the creation of cash inflows. Another source of running the business is owner’s capital where owners of businesses use their own money for expansion. Some of these internal sources aid in reducing the extent of relying on external sources of funding which are available to meet working capital needs, emergency and expansion requirements.

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External Sources of Finance

Financial possibilities originating from outside the company are referred to as external sources of money. These can include bank loans, investor-provided venture capital, or funds obtained in return for stock in the company (Eyiah and Bondinuba, 2020).

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As such, at GotoHolidays, the study can obtain different types of external funds to support the company’s development and new initiatives. Bank financing is a very important type of funding because it enables an organisation to borrow money from a financier to receive the money required for financing its projects and the banker takes its money plus an agreed interest. Trade credit also increases our cash flow flexibilities since it allows for creditors’ delay in paying the suppliers.

Equity finance is the other major source whereby through the floating of shares, funds are generated for expansion, as well as key talents, are attracted. The study constantly seek out partnerships with Venture Capital Companies especially where our innovative projects are involved as it opens up funding as well as expertise. Also, the lease of certain equipment helps avoid a direct acquisition, thus helping to conserve sorts of capital, and offering the opportunity to optimise the distribution of funds.

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External Sources of Finance - Example

• Bank Loans: Offer conventional sources of funds mostly through debts with well-understood payment mechanisms.

• Trade Credit: Extend credit terms to customers which causes appropriate control over cash flow (Study Smart UK, 2024).

• Equity Finance: Enables the organisation to increase capital through the offering of shares, to interested investors.

• Debentures: Facilitate long-term borrowings through bond issues which as the study know are non-repayable in the short term (Kaihrii Thomas, 2024).

• Government Grants: Grants which can be used to fund definite programs, projects or activities, and that enable expansion without incurring more loans.

Speaker Notes

At GotoHolidays, the study understand that there is no better source of finance than the external sources in terms of growth and expansion of the company. A major part of our financing plan includes bank loans that offer structured funds to support direct investments in new projects with assured measures regarding the manner of repayment. Another important asset is trade credit which increases our short-term source of cash by allowing us to pay suppliers at a later date hence increasing liquidity. Equity finance on the other hand enables the company to sell shares to investors who not only provide capital but also expertise. Further, the study discuss the concept of debentures as a mode of long-term funding from investors, which is a versatile form of financing. Government grants add to the above by providing financial support in the form of non-repayable capital.

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• Bank Loans: Offer non-flexible secured debt finance that has a predetermined method of reimbursement.

• Trade Credit: Provides customers with more time to pay and thus, enhances the company’s ability to manage its cash flow.

• Equity Finance: Enables business organisations to obtain funds from the public through the issue of shares, thus attracting investors.

• Debentures: Provide long-term finance through borrowing by bonds to avoid very short-term pressures to repay.

• Government Grants: Grants that are used to fund specific projects or activities thus enabling an organisation’s growth without necessarily incurring a debt.

Notes:

As it has been seen at GotoHolidays, external sources of finance are a very important type of finance for the company’s development. Bank loans continue to be an important part of our financing plan since they offer structured financing to enable the group to fund new investment opportunities while also enabling the group to manage the loan repayment cycle. Another key ingredient is trade credit which improves the company’s actual liquid flow by letting it purchase goods through credit hence delaying payments to suppliers. Equity finance lets the firm sell shares to the public and obtain capital from investors who, other than cash, bring their expertise. The study also whether Debenture is an informative way for acquiring long-term funds from investors which seems to be a flexible source of funds. Government grants also help us in our efforts as they provide funds that do not need to be paid back hence allowing for expansion without adding to debt.

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Limitations of Sources of Finance

• Bank Loans: Call for interest payments and in many cases collateral, thus elevating the risk of finance (Nirmalarajah Asokan, 2023).

• Equity Finance: Fragment ownership, especially when shares are floated in the market.

• Trade Credit: This affects reliability due to the effect of damaging the relations with suppliers by paying them after a long period.

• Venture Capital: A lot of expectations are set by investors when it comes to returns that put a compressed rate of growth on the receiving end (Sakshi Morge, 2024).

• Government Grants: Cohort-based, has a set selection process which makes it relatively difficult to get funding and hence may limit funding chances.

Speaker Notes:

As it has been said at GotoHolidays, each of the sources of finance has its drawbacks. Another disadvantage of bank loans is the fact that they attract interest and usually involve the pledge of assets which increases the level of risks for the bank’s financial obligations. Equity finance is concessions in ownership and control since the study can sell shares in the company to attract funds. By using trade credit to this extent, businesses get an improvement in the short-term liquidity but, extended credit terms can put a strain on the relations between the business and the suppliers. To attract venture capitalists, the firms require high returns, which puts pressure on the organisation for increased growth. Finally, government grants are known to have specific qualifying factors and therefore accessibility is competitive and at times the process can be somewhat rigorous.

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Why Different Sources

• GotoHolidays employs varied finance sources for different needs that are as follows:

Internal Sources:

• They include profits that enable a company to reinvest to expand its operations.

• Reduces the need for borrowing expenses to increase the company’s balance and solvency.

External Sources:

• This source of financing supports expansion and growth initiatives hence fulfilling its role as finance for growth (Levine, 2021).

• It means that equity finance mobilises funds while it organises investors as well.

• Depending upon the kind of information they provide, each source has its advantages as well as disadvantages (Maradin, 2021).

• This is achieved through the proper management of finances to enhance flexibility.

• Heresy distributes sources places GotoHolidays for stability within the competitive section for tourism.

Speaker Notes

At GotoHolidays, the study use many sources of financing to meet our various operational and developmental requirements. Accurate internal sources, especially the retained earnings, help in reinvesting our profit back into the business thus promoting expansion without using other people’s money or incurring on a loan.

This serves to improve our operational cash flow and enables the firm to react swiftly to market forces in the current and future dispensations. Bank loans on the other hand as well as equity finance are the other common sources of funds that are important in fulfilling the capital necessary to fund expansion and development.

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Most Suitable Source

For example, if a business requires finance for expansion, then it would be more appropriate to apply both internal and external sources of finance.

Internal Sources:

• Retained earnings are the first choice.

• This includes retaining primary profits for reinvestment back into the business, which was expansion without using credit (Gutterman, 2022).

• The use of retained earnings reduces the level of financial risk and cost of interest hence it is a cheaper mode of financing projects.

External Sources:

• It is desirable to use bank loans if for some reason the need for additional funds is more than the amount of retained earnings (Hartley and Kallis, 2021).

• They offer fixed capital that comes with an agreeable and calculable timetable of repayment which is advisable while planning.  

• It is thus seen that loans taken from the banks can be for meeting various needs, needs that are linked to the growth of the undertaking such as the purchase of new equipment or expansion of the facilities.

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Advantage of relevant source

Equity finance is another quite viable source, especially for firms that are looking for large funds for planned big projects. The business is selling shares whereby investors other than being able to provide capital, can bring in contacts and experience. While this somewhat reduces the ownership of the business, the amount of cash that this brings can take the business to the next level. Therefore, it is possible to assert that the combination of retail earnings, bank loans, and equity finance enables the business to achieve the benefits of each source and possess an optimal ratio of usable funds to ensure further development without jeopardising its stability.

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Conclusion:

Summary of Key Points:

• The miscellaneous source of finance is very important for GotoHolidays.

• Internal sources such as retained earnings help in the increase of financial stability.

• For instance, realised through the use of money from sources such as bank borrowings and equity funding.

Speaker Notes:

Therefore, the power of funds at GotoHolidays covers our requirement for operations and growth which makes our financial source diversified. The internal sources of funds like retained earnings are relatively more stable and do not have any liability attached to them as compared to the external sources of funds like debentures. Bank loans and equity finance are equally important to meet the requirement of expansion and new product development from external sources.

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