Financial Funding for Glen Company Inc - Thesis Proposal Example

Introduction: We will try to use a hypothetical company of Glen Company Inc. This company has its headquarters in Toronto Canada having branch networks in Middle East and the rest of African Countries such as Kenya, Senegal and Gambia. This paper tries to explain the various accounting concepts of analyzing financial books including sources of funding for a business entity. Sources of funding are key to the success of any business entity. Such funding are not limited to; financial investment, obtaining a bank loan, better management of working capital, asset finance, personal resources. The structured of this paper; The research tries to capture vital things inculcated in business financing such as; A summary of the whole process of financial funding for Glen Company inc. It identify the four sources of funding for its business We then assess the legal, financial and ownership implications of these sources of financing a business, We will then be able to evaluate the pros, cons and the overall suitability of these sources together with the purpose of such sources of financing. Finally, we will be able to conclude our discussion by recommending to a business entity why such funds are the best and how they should proceed in order to receive such funds if they are to remain competitive. Why then do this company need additional financing; Improvement of operations: The venture lab is an "experimental project" and so is seeking the "Next big thing". I believe that most companies that seek to improve on their operations would seek more funding in order to improve on their service delivery, cut on operation costs and improve their productivity. This will not only make it efficient but will also make it competitive in the long ru Market research. As the team is keen for technology that has been tested and a model starting to work in the market, funding will improve its ability to effectively carry out its market research. Source of funding; Financial Investment: Financial Investment (may also be referred to equity finance) entails offsetting part of your shares in the business to another investor. This new investor then takes to share with the owner any profits or losses that the business may make during a particular financial period. The admitted new investor injects fresh skill and opportunities to the industry like promotion and export trade to foreign countries. Secondly there will be no interest on the amount of the loan borrowed. Finally, the owner will no longer carry the burden of risk all alone but share it with the new investor. Obtain a bank Loan: a bank loan is credit, typically in the form of liquid cash that you have access to and settle up over a fixed span of era. Banks, and other firms and even relatives, may provide such loans. The repayment amount on the loan depends mainly on: The duration of the loan, the principal, security guarantee and the base interest rate levied by the financial institution. Loans are long term investment lasting up to 10 years. In most cases, loans may be pegged on a fixed asset of the firm. Better Management of Working Capital: This may appear to be an odd source of finance but very often businesses are sitting on undiscovered cash reserves which can be used to finance growth. Cash can be unlocked and released back in to the system thereby allowing self-financed growth plans by taking a close look at credit procedures, how credit terms are granted and how outstanding payments are chased. Ensuring that stock is kept at an optimum level via better inventory management is another area where cash can be released to support and finance growth. first-class management of operational principal is not presently about enhanced management of debtors and stockpile, it is as well about maximizing the conditions specified via creditors. Private wealth: through customary avenues of financial support being extra tricky to access production, owners are currently looking to their private wealth to finance development. Whether it is representation of money investments, via private acclamation or captivating extra mortgages on suburban property, such sources are an immediate answer. Asset Finance: The Asset Finance industry is scheduled on the notion of each preserving money or facilitating access to it. Asset financing, consisting of bill , factoring and granting of asset purchases, has been accessible as a supply of investment for several years, so far its only now gaining more acknowledgment. In a planet where money is emperor’s asset, financiers assist safeguard cash by financing the procure of property such as vehicles, equipment among others. Since the merchant banker is looking to the fundamental asset as precautions there is habitually veto prerequisite for extra collateral. Asset financiers can help speed up the flow of cash within a business by allowing quicker access to cash tied up in the debtor book. Conclusion and Recommendations: As one of the market leaders in Digital Telephony, Glen Inc. should utilize its working capital before seeking other external sources of funds since it requires no collateral securities and it’s not prone to external rigidities such as political atmosphere among other factors. If the management things that they are not up to date with such a system, then they should go ahead to finance their operations with the asset finance since it focuses in long term financing method than short term one. Paper 2: Abcam plc is a producer and distributor of high quality protein research tools. These tools enable life scientist to analyse components of living cells at the molecular level, which is essential in understanding health and disease. Abcam has its headquarters in Cambridge in United Kingdom and other subsidiary companies in other countries such as San Francisco, Tokyo and Hongkong.It has a customer base of averagely 16 million spread across the countries. Introduction: This paper tries to explain the various accounting concepts of analyzing financial books including sources of funding for a business entity. Sources of funding are key to the success of any business entity. Such funding available for Abcam Plc are not limited to; financial investment, obtaining a bank loan, better management of working capital, asset finance, company resources. The Structure of the Paper: This paper is structured in such a way that it begins with; A summary of the whole process of financial funding for Glen Company Inc. It identifies the four sources of funding for its business; We then assess the legal, financial and ownership implications of these sources of financing a business, We will then be able to evaluate the pros, cons and the overall suitability of these sources together with the purpose of such sources of financing. Finally, we will be able to conclude our discussion by recommending to a business entity why such funds are the best and how they should proceed in order to receive such funds if they are to remain competitive. Section 1: The tangible benefit is the value addition an investor will get after purchasing 5million ordinary shares at current offer price of 1.50 pounds. The direct benefits will be; The shareholder will have to gain from the twelve-monthly dividends affirmed by the Abcam plc to its shareholders. Secondly, the shareholders will be able to make decisions in the concern by way of voting. That is one man one vote policy will apply. The opportunity cost is the value of the foregone alternatives; In not investing in the ordinary share but instead investing in the bond of the company, The investor will forego the voting rights but instead be a creditor to the company, and he will be entitled to a specified annual interest rate of 8% payable semi annually. And at the maturity period of the bond he will be paid all the cumulative interests and the principal amount that is after 10 years. In the event of cancelling a proposed dividend of 0.05 pounds per share, the ordinary shareholders will not get their direct benefit of having growth on their investment, instead will have lost that opportunity of having to seek alternative path of getting their income. Section 2 Cash Flow Management; Just because sales are good doesn’t mean you’ll have that money when you need it. Anhort (2009) says that pecuniary arrangement will include hard cash stream supervision, identifying in progress your money requirements both month, apart from of your revenues. If you have slow payables or bad debt during times when you have high bills, a point Chapman (2010) do not consent since he says that you might lose the ability to order goods and services that keep your business running. In addition to creating a master budget that shows your average monthly income and expenses, create a cash flow budget that shows your anticipated actual income and expenses each month Improved Debt Management; The interest on credit lines, loans and credit cards is a hidden cost many small-business owners don’t track, because interest is tacked on to a balance and doesn’t require a cash payment each month. A financial plan should address your monthly interest payments, putting them into your budget so you learn your real financial performance. Your plan should address accelerating debt repayment, if possible, to reduce your interest expense. Accurate Tax Compliance; monetary forecast include estimate your taxes and adjusting your estimates as your sales rise and fall. Failing to pay income, property or payroll taxes on time can result in serious problems, including fines, penalties, and liens placed against your business. If you pay quarterly taxes, budget for those payments and put that money aside. Work with your accountant to determine how to set up your tax payments and make them on time. Section 3: The top managers including the CEO; will want to whether their targets has been met. The shareholders; will require financial information in order to know whether their investment is appreciating or depreciating. This will make them make decisions on whether to continue investing in the Abcam plc not. According to Warren(2010),the government and its Agencies; The Cambridge and the united kingdom government will seek the financial information so as to determine whether the Abcam plc may still honour its tax obligations. Section 4: Issuing 5m ordinary shares at 1.50 pounds will increase the P.E ratio while at the same time reducing the Earning Per share ratio due to the new share floatation in the market.Return on capital employed will go up by equal margin. Issuing a bond of 5m, paying 8% per annum redeemable in 10 years with a face value of 1.00 pounds at an offer price of 0.8 pounds will mean that the value of creditors has increased.The P.E will reduce while at the same time earning per share will be considerably low due to interest rates paid out. Conclusion: Finance is the core of the operations of the business , it determines how the resources are a located in the business, what are the expected revenues and how and where these revenues will be used. Case Study 2: This case study analyses the income statement of Casey Barber shop located in Magdelen road. Casey Runs a barber shop which is located in Magdelen road. The lease agrrement is valued at 25000-35000 per year. The operation of the shop is 6 hours per day. It experiences many customers meaning services are better even though there is competition in the area. Their output is 6 clients per hour, meaning 120 (0.5*5*48) for adults and 120 (0.5*8*6) total income =240 pounds per hour. Salaries for employee=4 pounds*3=12 pounds per hour. No insurance cover. Bank loan=60,000 pounds Interest per month=415 pounds on reducing balance method. Expense are; Hair product= 4per bottle and lasts for 100. Toys or sweets for every child =0.20 Laundry and cleaning =10 pounds per day. Average utilities per month=70 Fixed rates=200 per month Vat and annual returns=100 pounds for every 3months. Own salary =2000 per month. Bank overdraft=750 pounds with interest of 0.18 p.a Task 2: Improvements required Avoid take salary for own use. This will eventually make the business more viable due to more flow of funds. . a cash flow budget and profit and loss forecast for each of the following six months pounds Dec-00 Jun-00 Dec-99 Jun-99 201600 259200 201600 259200 sales (240 *6 hours) *6*6) EXPENSE SALARIES TO STAFF 12960 12960 12960 12960 Hair product 25 25 25 25 sweats and toys 21.6 21.6 21.6 21.6 Laundry and cleaning 1800 1800 1800 1800 average Utilities 420 420 420 420 Net Profit 136373.6 243972.2 136373.6 243972.2 vat 400 200 400 200 interest 4980 2490 4980 2490 Profit and loss forecast for each of the following months. Net profit for the months 130993.6 241282.2 130993.6 241282.2 Liabilities bank overdrafts 885 885 885 885 own salary 12000 12000 12000 12000 Total out flow References Anholt, S. (2003) Introduction to Financial Reporting: the upside of global branding. Amsterdam, Chapman, C (2012) How to write an introduction: Unpublished document circulated in class. Oxford UK Hoxley, S. (2010) BTEC: Higher Nationals Business Specification level 4 and 5. Issue 3 Elsevier Warren and Fess, S. (2010) A critical account of the process of Financial Reporting. Marketing Review, 10(1), 70 Read More