Martn Albuja

Forms of finance - case study corrections

1. Unincorporated business A privately owned business; owned by one person who has limited liability. Not legally registered Going public.

This can be selling shares in a business. Shares can be traded on the open market 2. Discuss the additional sources of finance that would be available to Sherston Antiques if they went public. Share Capital; Adv. No initial payments and dilute control. Disadv. Need to pay out dividends which must be paid from profits 3. Internal and External sources are important as working capital can often be tied up in the day to day running of the business (raw material, labor etc.) If the business wishes to expand they need to raise $1 million, which may need to come from external sources such as Share capital, or Loan capital, which can be serviced over time with increased retained profits that an expansion of the business may bring. 4. Adv. Provide business help. Sit as non executive directors. They have an incentive to protect their investment so will therefore do whatever is best for the business DisAdv. Profit and sales targets may be imposed on a business. If these are not met then venture capitalist may contractually increase their equity stake and take control of the business.

Forms of finance - sole trader report

David Merchant operates as a sole trader and is considering turning his business into a private limited company. He asks you to produce a report outlining the merits of such a move as well as the case for remaining as a sole trader, with your personal recommendation.

Forms of finance - short answer questions

Question 1
Company sells owned equipment to a leasing company and then leases it back.

Question 2
Spread Risk. Have enough money to finance the day to day running of the business (liquidity) plus the expansion of the business

Question 3
Share: Demonstrates actual ownership of a portion of a business. Debenture: more difficult to understand. Basically a long-term guarantee issued by a business that if you loan them a certain amount of money then this will give you a fixed rate of interest back. This is often more profitable than depositing money with a bank and any risk is secured against the businesss assets.

Question 4
Venture capitalists may become the controlling interest of a business if agreed sales targets, or profits, are not met.

Question 5

1. Profits 2. Overdrafts 3. Bank loans 4. Trade creditors 5. Selling of unwanted assets 6. Hire purchase 7. Credit sales 8. Taxation 9. Debt factoring 10. Sale of more shares to existing shareholders 11. Dividends
create value for shareholders

[I] or [E] or [U] [I] or [E] or [U] [I] or [E] or [U] [I] or [E] or [U] [I] or [E] or [U] [I] or [E] or [U] [I] or [E] or [U] [I] or [E] or [U] [I] or [E] or [U] [I] or [E] or [U] [I] or [E] or [U]
Joint Venture: An alliance where both parties keep their identities although share markets, knowledge and profits

Tesco: sale and leaseback

Question 1

Question 2
To release funding for growth; expand overseas; finance shares and

Question 3

Venture Capitalists Sale of Assets Retained Profit

Question 4
Adv: Do not need to find a lump sum. Quick access to cash; property risks transferred to the buyer; cash can be returned to shareholders. DisAdv: Increased costs. An increase in tax paid to the government through capital gains tax. Outgoings of the business increase.

Forms of finance - sole trader report

David Merchant operates as a sole trader and is considering turning his business into a private limited company. He asks you to produce a report outlining the merits of such a move as well as the case for remaining as a sole trader, with your personal recommendation. Sole Trader; assets and liabilities are not separated from the individual. There is unlimited liability. NO directors or share holders Private Limited Company: are incorporated, which means they have their own legal identity and can sue or own assets in their own right. The ownership of a limited company is divided up into equal parts called shares. Whoever owns one or more of these is called a shareholder. Because limited companies have their own legal identity, their owners are not personally liable for the firm's debts. The shareholders have limited liability, which is the major advantage of this type of business legal structure. Unlike a sole trader or a partnership, the owners of a limited company are not necessarily involved in running the business, unless they have been elected to the Board of Directors. A discussion of the financial Implications of both moves. Internal and External. The need to generate capital? A recommendation