Business Case Background
Apple needs support expansion related to operational efficiency and the development of new products in the changing digitalized world. The company understands the importance of aggressive marketing and requires financial assistance to maintain brand awareness and customer interest. Different funding sources should be accurately analyzed in the promotional case to implement the proper financial support.
The Need for Funding
Apple is a forward-looking organization that strives to expand and increase the efficiency of its operations. Furthermore, the company aims to invest in research and creation of new products to meet the needs and wants of clients. The world is becoming digitalized, and the development of cutting-edge innovations is a need for technology companies (Vaio et al., 2021). To maintain brand awareness and interest from people, the funds should be invested in aggressive marketing that presents the company globally.
Sources of Funding
Apple can consider introducing new shares to raise funds from investors already in the game and those still deciding to join. Moreover, by learning about the option of corporate bonds and loans from financial institutions, I can meet all the set goals for the year and ensure enough money for the project executions. Finally, self-funding can also be considered to utilize the existing cash and generate profit for specific financial plans.
Requirements of Funding
Equity financing related to the creation of extra shares requires dilution of ownership. According to Tully (2023), this type of investment can also include the loss of control and dividend payments to stakeholders. Debt financing and loan-taking require special obligations with interest. In this case, it is important to follow the cash flow, as poor management may cause an inability to pay out. Self-finding saves ownership, but the scale of projects can be limited due to finite internal resources.
Analysis of Associated Risks
Market volatility can affect stock prices and change investors’ confidence depending on external problems or achievements. Rate fluctuations may lead to higher payment costs for existing loans that have not been paid out in several years. However, these shifts are not always negative; the company should conduct deep market analysis to understand the future of interest rates in the technology industry. The production and execution of large-scale projects may be inefficient due to limited resources and lack of predictability.
The Best Fit for The Company
Apple is one of the most stable companies in the world. Therefore, debt financing can be the best fit for improving financial performance. This type of financing is suitable for projects and businesses with predictable cash flows. Through the years, Apple has presented stability and small fluctuations that have not hurt general performance. Consequently, the leverage of external funds without diluting ownership can be protected. Equity financing is an idea for long-term plans and can also fit Apple’s performance to ensure future stability.
Cost of Capital
The central bank rates and the demand level in the market influence short-term funding sources. Moreover, if the company can delay payments to suppliers without penalties, the interest cost can be calculated based on the early discount offered by the third party. In the long term, researching prevailing interest rates can build strong bonds between companies in the market. For debt financing, the variable APRs are between 19.24% and 29.49%; equity financing is around 5.2% (Apple, 2023). The estimations can be conducted using the Capital Asset Pricing Model (CAPM) for the valuation methods.
References
Apple. (2023). Investor Updates. Web.
Tully, T. (2023). What’s left in your list? An analysis of business database holdings, funding sources, cancelations, and the impact of COVID-19 at top ranking U.S. universities. Journal of Business & Finance Librarianship, 28(3), 172-197. Web.
Vaio, A. D., Palladino, R., & Pezzi, A. (2021). The role of digital innovation in knowledge management systems: A systematic literature review. Journal of Business Research, 123, 220-231. Web.