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Identifying Financing Needs and Constraints

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Introduction

Identifying Financing Needs and Constraints I will be carrying out an investigation on a Morrison financing needs and any constraints placed on them in regard to their legal form. I will be looking at their legal form and its advantages and disadvantages. I will also be looking at what financial sources they have available. I will also use their Accounting documents i.e. Balance Sheet and Profit and Loss Account to carry out my analysis. The Business I Have Chosen is Wm Morrison Supermarkets PLC Morrisons was established by William Morrison in 1899, initially as egg and butter merchant in Rawson Market, Bradford, England. His son Sir Ken Morrison is chairman of the company now. The company was taken over by Sir Ken in 1952 and started to grow the business. In 1967 the business became public limited and the company was listed in the London Stock Exchange. Morrisons as a company now has 368 superstores in United Kingdom including the new store opening by the end of 2007 and those it retained following its purchase of Safeway plc. The company has its core focus on groceries and homewares, with fewer electronics, clothing and furnishing than the company's key supermarket rivals. The Trading Performance of Morrisons Morrisons has announced that the outcome of its strategic review, as well as its initial results on 15 March 2007. The Turnover was up 3% to �12.5bn (2006: �12.1bn), like for like sales (ex fuel) up 5.2% (2006: 2.4%), and profits jumped to �369.0m before taxation- a company record (2006: (�312.9m)). It also announced that most of the targets from its original three- year 'Optimisation Plan' had been met, including its plan to increase gross profit margin by 90bps, in one year. The business now has �450m to modernise itself. PLC Morrisons has become Public Limited Company in 1967. Companies within PLC should audit their accounts and make sure the accounts are ready for any inspection. ...read more.

Middle

If the borrower cannot pay the money back then the bank has the right to sell the property to recover their money. Small businesses usually use mortgages and it is popular but it has a big risk. * Venture Capital - this source of finance is becoming popular with companies which are growing. Venture capitalists are known as groups of individual or companies who are usually wealthy and they are set up specially to set up to invest in growing businesses. The targets for venture capitalist are businesses with potential. Venture capitalists are able to offer capital for those businesses which are developing. By these venture capitalists has the right to say something in the business running and share of the profits made. Some banks do not want to get involved in projects with risk so venture capitalists are able to take on these projects. * Merchant or investment banks - act on behalf of client to organise and underwrite raising finance. Investment banks are often known as wholesale banks or merchant banks. These banks do not deal with the public at a retail level, they offer loans and advice on other financial sources and they are like brokers. They may also be able to arrange shares on equity markets. The loans which they offer are much more than a retail bank can offer and the deposits and loans they take are recognised as wholesale deposits. * Government/EU - may offer loans in certain situations. Funding from government is attractive because it is often cheap. Government loans are available for periods of between 2-10 years and the some varies between �5,000 and �100,000. There are range of different loans and grants existing. To qualify for financial help firms often have to set up in areas where unemployment is relatively high. Short-Term Finance Short-term finance is used to cover fluctuations in cash flow. Some of the short-term financial sources are as follows: * Bank loans - bank loans are amount of money which is being borrowed and agreed to pay back during a certain periods of time with repayment schedule. ...read more.

Conclusion

The lessee has possession of the asset on payment of specified lease rentals over a period. Morrisons balance sheet shows the figures of �227.9m for leasing. This is the amount which this business uses for its leasing purposes. Another short-term source is creditors. Creditors form part of a business's liabilities and represent amounts due to third parties. Creditors are analysed in the balance sheet into those due within one year and those due after more than one year. For most businesses, the main creditor is "trade creditors" - amounts owed to providers of goods and services on credit terms to the business. The figure for creditors show �1,501.1m in the balance sheet of Morrisons. The main creditor for Morrisons is similar to other businesses. The creditor is trade creditor. The amount for trade credit is �905m as on balance sheet of this business. There are no bank loans or overdrafts in the balance sheet. Long-term sources for Morrisons Long-term finance is being used by Morrisons. Some of the sources of long-term finance are: The Long term share Morissons uses is Ordinary shares. They have ordinary shares because the share price fluctuates with trade on stock exchange. Morissons sells shares on stock exchange and from this the business earns a capital of �267.7m. Retained profit is another source of long-term finance for this company. Retained profits are those profits that have not been paid out as dividends to shareholders, but retained for future investment by the company. The figure on the balance sheet for retained profit is �1,039.5m for Morrisons. Some Other Financial Uses for Morrisons Morrisons as a business also invest their some of their funds in property. The balance sheet confirms the figures of �240.5m under the name of investment. In the balance sheet of Morrisons there is also a figure which is for merger reserve. The amount is stated as �2.578.3m. In the balance sheet there is also a part which is named as 'other financial assets' and this is �19.1m. ...read more.

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