The optimal utilization of funds is a key element in the management of public resources. The best use of public funds demonstrates compliance with the law and conventionally accepted standards, and confirms the accountability and financial control of the organization. Likewise, an optimal utilization of funds values the most efficient use of operational inputs and resources. This article outlines some of the important criteria to consider when evaluating the optimal utilization of funds. We’ll cover the different types of financial decisions, and the various ways to measure these.
Proper utilization of funds helps ensure that the company will be able to meet its operational needs and maximize shareholder expectations. The optimal use of funds is determined by factors such as the nature of the business, the size of the company, expected return, cost and risk involved, ownership structure, and expectations of investors. Additionally, an optimum utilization of funds ensures that funds will be invested in safe and profitable ventures. In addition, a sound capital structure maintains a balance between equity and debt capital.
A borrower with a line of credit of $2 million may be assessed a utilization fee if the total outstanding balance exceeds a threshold. On the other hand, a borrower with a balance of $1 million may not be assessed a utilization fee. Using a utilization fee can provide a stream of capital for lenders while giving borrowers an incentive to reduce their balances. However, these fees will vary based on the type of credit or loan. A borrower may be required to pay a utilization fee on an average of the total aggregate outstanding balance.
The use of funds is governed by the fund authority, and trust accounts. It is the responsibility of managers to understand the limitations on the use of all types of fund accounts. For details, refer to the Allowable Expenses List. A manager should obtain a fund authority for each trust fund. In addition, a manager should review the fund authority with all staff members, including those who work in departments that manage clinical funds.
Raising funds from the market can be difficult for a new company. They must pay higher commissions to stockbrokers and brokerage fees. In addition, their debt-to-equity ratio is low. To raise additional funds, companies may issue debentures. In this case, a significant percentage of income is used to repay the debts, leaving little for dividend payouts and maintaining reserves. Ultimately, the decision to issue debt must be based on a balance between the firm’s needs and resources.
The sources and uses of funds statement for a case farm in west central Indiana illustrates the financial management process. Net cash provided by operating activities is $97,473 after deducting cash farm expenses, family living withdrawals, and taxes. In addition, net cash provided by investing activities is $184703, meaning the operating expenses and investment activities are not enough to cover this expenditure. To make the numbers more meaningful, a farm owner should consider reducing its costs and expanding its income.
