Q1. Using the Mabati Rolling Mills Case Study, explain the various sources of funds as discussed by the management of Mabati Rolling Mills. Give the advantage and disadvantage of each source.
Issue Commercial Papers – It is identified in (Short Term Finance:Commercial Paper, 2008) that a commercial paper is simply unsecured short-term debt instrument issued by an organization for meeting short-term liabilities. An advantage of issuing commercial papers is that only companies with high credit ratings can do so, therefore, a company like MRM can enjoy the prestige with such an issuance. Also it is cheaper than a bank loan as it has low interest rates. However a disadvantage could be that there are no flexibilities with regard to repayments and that it lacks liquidity as it cannot be cashed before the maturity date.
Float Shares in the Market Place – Floating shares can be identified simply as the shares of a public entity that are available for trading in a stock market. An advantage of this source of funds is that the entity gets access to new capital that can be used in developing the business. Although its disadvantage is that the shareholders’ interests may differ from the company’s interest or objective.
Borrow long-term loans from local banks – These are a common way of financing major purchases of an organization. An advantage is that it is directly linked to an organizations operating capacity. Another advantage of long-term loans from local banks is that it enables a firm engage in large projects. Although its disadvantage is that the banks charge high interest rates.
Borrow long-term loans from international banks – Long term loans are usually repaid within three to ten years, although some can exist for more th...
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References
A Basic Guide to Bank-Term Loans. (n.d.). Retrieved from Entrepreneur: http://www.entrepreneur.com/article/52728
Besley, S., & Brigham, F. (2005). Essentials of Managerial Finance. Ohio: South-Western.
Commercial Paper. (n.d.). Retrieved from Cucfa: http://www.cucfa.org/archive/Commercial_Paper_Definition.htm
Dictionary, I. (n.d.). Agency Problem. Retrieved 10 November, 2013, from
http://www.investopedia.com/terms/a/agencyproblem.asp
Harrison, H. (2005, July). To float or not to float? Retrieved from Duport: http://www.duport.co.uk/guides/growing-your-business/to-float.php
Short Term Finance:Commercial Paper. (2008, September 9). Retrieved from College Accounting Coach: http://basiccollegeaccounting.com/2008/09/short-term-financecommercial-paper/
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...ws the business to lease equipment used for farming and production. This use of financing allows Tassal to avoid a large loss of capital when purchasing equipment. Instead they are able to make periodic payments, which offer a distribution of funds rather than an initial large expenditure. Therefore Tassal is able to focus on its key activity of ensuring growth and a continued long term return for investors. By avoiding large expenditure of capital these funds can be kept, allowing for increased profits which directly affect the shareholders in the company.
MillerCoors can establish the context as generalized machinery failure. Through identifying the risk, MillerCoors can identify the source of machinery failure could happen anywhere from production machinery to delivery equipment, with the causation arising from mishandling of machinery, general wear and tear or even sabotage events. Consequently, failures in machinery could not only create operational delays, but would cause financial loss and increased liability. Depending on the age and the extent of personnel training, the likelihood of machinery failure would vary drastically within the organizations and between brewery operations. To properly evaluate machinery failure risk, all eligible assets should be broken down into different levels, based in the type, age and complexity of the machinery. To reduce the risk and loss potential, MillerCoors, should instill performance measure to within policies and procedures to makes sure equipment is regularly inspected. In addition, the organization should focus on provided proper and frequent training to make sure personnel are educated in the use of the organizations machinery. Therefore, through the risk management process MillerCoors can provide treatment to reduce the effects of machinery
Debt capital refers to money borrowed. Examples of this include bonds and short-term commercial paper. Bonds are more widely used because it provides a company with years to come up with the principal while paying interest only. Bonds are rated (i.e. AAA, AA, BB, etc.), these ratings correspond to the risk of default. The higher the rating, the lower likelihood of default and therefore a lower interest rate accepted by the lender. Short-term commercial paper is typically...
In this report the understanding of how the 12000 pounds invested to the chosen company will be stated and the reason for an increase or decrease in the money invested.
A long-term capital investment are classified as an investment that is longer than a year. Capital investments are necessary for ongoing business activities Capital budgeting is an estimate at the time, “the budgeting process is subject to purposeful manipulation, as well as judgmental errors.” “Considering the significant size and long duration of these investments, inappropriate capital investment decisions may have serious financial consequences for a business.” (Regis University, n.d. p.2 )
Many times a company is looking to expand its operation or may be seeking to go on a completely different direction than when it was first funded. This can be done by both a publicly traded company and a non-publicly traded company, which is also considered a private company. When a private company does go public is known as an initial public offering (IPO). Whatever the status of the company, though both benefits and drawbacks to issuing additional shares of stock. One obvious drawback is known as diluting the ownership of existing shareholders by reducing their actual ownership in the company on a percentage
Financing decisions focus on how an organization can pay for its major projects. The financing decisions also determine the source of money in the organization. The business may require more cash for capital investments as compare to cash generated within the organization. There are two options for business to generate cash one is to obtain cash from owners, and other is to obtain cash from lenders (Kaplan Financial, 2015).
The convoy consisted of thirteen vehicles; 6 M-ATV’s and 7 Mine-Resistant Ambush Protected (MRAP) vehicles. The lead MRAP’s was configured with a Mine-Roller, an attachment on the front of the vehicle used to combat pressure plate Improvised Explosive Devices (IED). Lead vehicles within all patrols were outfitted with Mine-Rollers and proved to be extremely effective in combating pressure plate IED’s. I always knew that Mine-Rollers were essential in convoy operations but it never occurred to me until the morning of August 3, 2014 how much they changed the convoy’s ability to maneuver safely in enemy terrain.
Answer of the question one will give overview progress, update of the primary asset. Financial and performance information needed as major part of the investment planning phase. The investment decision making is then determined by Question two, where the answer will provide in brief the levels of servi...
There is a range of criteria relevant for a decision of financing a new venture. To construct my list for the evaluation of a new company as an opportunity I have selected to refer to t...
... low rate or utilize other financing activities with a low quick ratio. This is a negative trend in ADCT's profitability possibilities.
The management in the company is not structured. The cash position and contribution of various businesses into profit is also worrisome. We are in serious need of cash for the technological advancement in our tool business. The only way we can compete in the market is on the basis of technology. The inefficient production techniques lead to much higher cost of production.
One of the key areas of long-term decision-making that firms must tackle is that of investment - the need to commit funds by purchasing land, buildings, machinery, etc., in anticipation of being able to earn an income greater than the funds committed. In order to handle these decisions, firms have to make an assessment of the size of the outflows and inflows of funds, the lifespan of the investment, the degree of risk attached and the cost of obtaining funds.
Many organizations have maximized the use of cash on hand by effective cash management techniques and the use of short-term financing. This paper will discuss various cash management techniques and short-term financing methods used by organizations.
Smaller companies are much more likely to obtain an attentive audience with a commercial loan officer after the start-up phase has been completed. In determining whether to extend debt financing--essentially, make a loan--bankers look first at general credit rating, collateral and your ability to repay. Bankers also closely examine the nature of your business, your management team, competition, industry trends and the way you plan to use the proceeds. A well-drafted loan proposal and business plan will go a long way in demonstrating your company's creditworthiness to the prospective lender.