Finance is a part of management activities.

Finance means managing the money from

different sources. A finance manager manages the money for investing in different sector.
Shortly finance is an activity to find out the source of lower cost than expected return.

According to Investopedia, “Financing is the act of providing funds for business activities,
making purchases or investing.”

Finance is concerned with the process institutions, markets and instruments involved in the
transfer of money among individuals, business and governments. ( Gitman ).

Financing process deals with three terms:

1. Sourcing the fund

2. Collecting money
3. Investing the money
1. Sourcing the fund: There are a lot of ways to manage the fund. But expertise
mainly divided in 3 categories.
a. Short term (< 1year)
b. Midterm (1-5 years)
c. Long term ( 5> years)
2. Collecting the money: When manager find out different sources of fund then they
need to find out the lower cost of fund. The manager will go through the concept
of WACC, cost of debt, cost of equity etc. He will take the money from the
sources of lower cost.
3. Investing the money: After collecting the money manager will find out the highest
source of return. He will find out the IRR, NPV, ARR, Expected return and
standard deviation etc.

Let’s go to my business plan and financing plan of my business. Here, I am going to launch a
restaurant business in Mirpur. Because of Mirpur is busy place of Dhaka city. So many peole
are working here and living also. So many school, colleges and campus of different
universities are here. So I will get a lot of customer here.

In the beginning of my business I need to collect the money from two sources. I will take
loan from trust bank and rest of the money I will bring as equity. I am sourcing 7,00,000 Tk.
From Trust bank for 10 years and 5,00,000 Tk. from my pocket as an equity money.

Using this 12,00,000 Tk. I will buy some furniture for my business around 3,00,000 Tk. I
need 300,000 Tk. to decorate the whole restaurant. 4,00,000 Tk. is needed to make a healthy
and beautiful and well decorated kitchen. So that I can serve the best food to my customer. I
will advertise my business. So I need 20000 Tk. to advertise. Rest 1,80,000 Tk. will keep for
my daily operation.

My annual sales will be increased by different ratio in different year. Based on my sales and
other expenses I have tried to make a cash flow and try to find out some different value.
 Cash in flow TK
Year 1 119,263,520
2 273,263,201
3 442,750,118
4 623,294,062
5 813,379,035
6 1,014,654,947
7 1,231,679,845
8 1,473,063,102
9 1,727,567,186
10 2,007,031,297

NPV @ 6.5%= 6,224,991,085

WACC= WD*kd+WE*Ke

= (.42*.17)+(.58*.11)

= .145

Expected return more than 14.5%. I want to earn at least 17% per annum.

I assume growth rate is here 3%.

FCF (1+ g)
Terminal Value=
(WACC −g)

3378562(1+ ..0 3)
=
(.145−.03)

= 30260160 Tk.