Question

What are the key drivers of the firm's sources and uses of funds, and what is the relevance of each to the firm's value creation?

Answer 1

Following are the key drivers of the firm's sources and uses of funds and there respective relevance to the firm's value creation is as follows:

Access of Capital : The size of organisation determines the value creation as smaller the entity the more limited access to debt and equity.

Customer Base: For value creation of firm it is important to have well diversified and strong customer base as in cases where chunk of revenue is in hands of few customers the entity suffers from risk of loosing revenue if it fails to diversify.

Economies of scale: As the output of production increases the business tend to decrease per unit as the costs are now distributed amoung larger volume hence, adding value to firm.

Human Capital: The knowledge , ability, skill, experience of the employees of the entity adds to value creation as they are the heart of the organisations.

Branding and Marketing Strategy: Strong branding does not only improve the sales by increasing customer base with the help of market recognition but also helps in attaining overall objectives of entity which further adds to the value of firm.