Growth Strategies Using Financial Investments and Bonds

Growth Strategies Using Financial Investments and Bonds
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Growth Strategies Using Financial Investments and Bonds
Business cannot exist without the objective of expanding and growing in future. All business must have a growth strategy which is implemented to increase the returns. Enlarging the business by increasing the number of operations as well as opening additional branches are some of the signs of a thriving business. In that case, a business must consider various factors that are accrued by growth. Financial investments are one of the items that are included in a business growth strategy (Jordan, 2014). The following discussion entails justification of companies using financial investment in the growth strategies as well as issues surrounding the use of financial investments.
Business grows by taking advantage of the gaps that exist in the market. Financial investment, therefore, is important in grabbing these opportunities that help the business to thrive. For instance, if a particular product is scarce in a certain region, a business that has finances to invest in such a place will invest there and eventually experience growth. The two types of financial investments that companies use include equity investments and debt investments. Equity investments or bonds means that a business uses its investors to provide capital in exchange for a given percentage of its profits and losses (Jordan, 2014). On the other hand, debt investments as the name states mean a business acquires capital through borrowing.

Regardless of the type of investment used, they will affect the bottom-line of the business as they will use the raised capital for its growth strategy by adding investments where necessary.
There are three types of financing policies in which companies use for their growth strategies. They include equity investments, debt investments, and cash equivalents. The advantages of equity investments are relatively low volatility; they are easily liquidated, as well as they have legal protection. The disadvantages include, they are subject to risks of change in interest rates and have a reinvestment risk. The other type is debt investments which have various advantages including having control on how the debt is invested and predictability of interest rates. The disadvantages of interest rates include collateral must be present, and repayment must be in fixed payments Revelli, & Viviani, 2015). Cash equivalents investments have several advantages including their ability to earn interest unlike cash as well as they are easily converted back to cash. The disadvantage includes lower interest earned compared to holding a long-term asset, and there is a risk of holding large amounts in cash equivalents due to low-interest rates.
In conclusion, financial investments are crucial to the business as they have a direct impact on the company’s balance sheet. Debts and equities will mean that they are long-term liabilities while cash equivalents reported at short-term assets.
References
Jordan, B. (2014). Fundamentals of investments. McGraw-Hill Higher Education.
Revelli, C., & Viviani, J. L. (2015). Financial performance of socially responsible investing (SRI): what have we learned? A meta‐analysis. Business Ethics: A European Review, 24(2), 158-185.