• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Unit 7 Finance, Cash Flow and Insolvency Background Information on Owensport Owensport a sole trader intends to setup a business manufacturing a new style of multi-gym in the Reading

Extracts from this document...

Introduction

UNIT 7 FINANCE, CASH FLOW AND INSOLVENCY Anzal Ali Unit 7 Finance, Cash Flow and Insolvency Background Information on Owensport Owensport a sole trader intends to setup a business manufacturing a new style of multi-gym in the Reading area. Here are the following fixed assets that he will require to run his business: * Premises * Machinery * Equipment (Office) * Vehicle Working capital * Labour * Spare Parts * Telephone * Stock * Lighting/heating/electric How to pay for the assets For Owensport to purchase his fix assets he should looking init two terms of finance, medium term finance is any thing from borrow money from 1-5 years. The last term of finance is a long-term finance which borrowing money for 25 years, for example Owensport's wants to purchase his premise by mortgage. Here are some of the following ways for Owensports to pay for his equipment. Three of them involve buying the equipment, so you can become the owner; the other do the ownership retained elsewhere the ways are: * Mortgage * Buying outright * Hire purchase * Leasing * Contract hire Mortgage Most people see a mortgage as simply a long-term loan, to help buy a home or a business premise. But the word itself means any loan that's 'secured' against property. With Owensports home as security, the lender is usually able to offer him a lower interest rate than he will find with other types of loan. The lender will check details of the applicant's income, and probably ask to see some recent pay slips. If they are self employed, as Owensport is he may need to show his last 3 years' accounts. He also will be asked about any other regular outgoings (e.g. credit cards and personal loans) so the lender can check that he really can afford the loan. Some people find it difficult to prove how much they actually earn, because they're self employed and have only started the business or been in business for a year or two. ...read more.

Middle

paying for the stocks, wages, bills etc); the source of working capital is current assets. A current asset is a short-term asset, which a company uses to generate cash. But there also is a current liability, which a company has to be taken to account how much working capital the company has at its disposal. To find out the working capital the following equation must be done. WORKING CAPITAL = CURRENT ASSETS - CURRENT LIABILITIES | | STOCK + DEBTORS + CASH Working capital is the same as net current asset and its is imporant to the company balance sheet. It is important to many business to have working capital to meet the company ask. Many compaines have gone under because they have not found enough working capital. The managemnet of the working capital is called the working capital cycle. A working capital cycle chow cash following through differnet stages of business. Some part of of this cycle may take longer than others, and the amount of the working capital will depend on the timing in the business. Loan A loan is an amount of money a company borrow for a set period and with an agreed repayment schedule. The repayment amount will depend on the loan size and the interest rate. Loans are generally most suitable for paying for assets, like gym equipment, for -up capital and for other cases where the amount of money you need is not start going to change. The terms and price of loans vary by provider and are usually negotiable. Advantages * The company is guaranteed the money for a certain period, generally three to five years - unless you breach the loan conditions. * Loans can be tied to the lifetime of the equipment or other asset the company borrowing the money to pay for. * The company will know what the repayments are and can budget accordingly. ...read more.

Conclusion

The advantages of being a Plc are: * You get to raise more capital by floating on the Stock Market * Sell the shares of the business to members of the public * There is limited liability to the owners, if the business goes 'bust' - if the business can longer operate in the fierce market or are facing financial ruin then the owners are protected by limited liability, they only stand to lose the amount they have invested in the company. * Sale of shares allows larger sums of money to be raised * Whilst the money has money permanently, the owners, the individual owners can recoup their money by selling their shares to other people * Directors can be bought in as experts in certain fields However being a Public Limited Company, there are a few disadvantages, which can affect the further success of the company. These are: * To become and trade as a Plc you must have a share capital of at least �50,000. * Low profits may mean low bonuses or dividends for employees/shareholders * There are a number of legal requirements to fulfil when setting up a PLC * Regulations mean that it is more expensive to set up than a sole trader or a partnership * Accounting records of Plc's are less private than those of other organisations. Companies are governed by the Companies Act 1985 which states that financial records must be audited and made available to the Registrar at the Companies House * Directors need to report back to shareholders at the AGM (Annual General Meeting) where unpopular decisions and poor results must be explained. * If the company is operating well, financially, then they are likely to face a take over from bigger competitors. From the above advantages and disadvantages you can see that they both weigh out to be the same on both sides, how ever there are probably more advantages than disadvantages, or there are more disadvantages than advantages. ?? ?? ?? ?? Anzal Ali BTEC National Diploma in Business 07/05/2007 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Structures, Objectives & External Influences section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Structures, Objectives & External Influences essays

  1. Marked by a teacher

    ASDA's Ownership

    4 star(s)

    * Suppliers and resources Cost of Premises The cost of the premises depends on how much the land will cost and where the land is. If the land was in Central London, the land will expect to reach near �120 million due to it being in a prime site.

  2. Introduction to Business Assignment

    outflow to the best possible way thus depreciating the company's chances of insolvency and liquidation. 5.3. This function will also help to help boost Sainsbury's achieve their objective relating to profitability levels by ensuring that they cut they're costs. > 5.4 Customer Services - It has become noted that increasingly,

  1. The Business Environment Coursework. Describe the type of business, purpose and ownership of ...

    Public sector companies struggle, as the government has to make cuts, the government have less tax income, and have to pay more out in state benefits and they also spent a huge amount of money bailing out the banks. Small businesses and start-up businesses will suffer a lot and will

  2. For my portfolio, I was asked to do an assignment on two businesses. I ...

    they used to print the cards separately for �5,10 and 20 and then they activated to the main frame computer. There method of choosing unique pin number is unknown due to security reason. The cards used to expire within 45 days after the first use or 1 year after the manufacturing date of the card.

  1. Outline key features of legislation and regulation on health and safety as applied to ...

    Health and Fitness Centers It is important that users are supervised and receive adequate instruction on any equipment that they use. Equipment must be correctly installed, properly maintained and inspected regularly. Accidents certain accidents must be reported to the Local authority under the requirements of the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995 (RIDDOR).

  2. External influences on business. At ASDA we have to follow the following employment legislations ...

    How ASDA looks in the eyes of its potential customers and investors of its vital importance to the whole company. Every effort is made to present ASDA as a caring business offering wholesome food and goods such as clothes. Its communication department keeps the media up to date with company

  1. Vodafone Plc

    The management accounting function deals with this function. In order to survive and maximise profits for the finance department they must increase its market share and at time to time produce the profit and loss account for the large varieties of each product weather to see if it is making

  2. Investigating Business. Tesco PLC. I will be describing the aims and objectives of ...

    Tesco?s uses enterprise skills to help their business meet their objectives. Tesco use motivation& confidence to make sure their company meets all their objectives. Tesco?sbusinesses expand by building new stores, but without confidence Tesco might be scared to move out of town or build new stores, this could result in

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work