Capital Employed X 100
The capital employed is defined as the fixed assets and the net current assets of the business.
The Acid Test Ratio.
Stock is part of the working capital of the business. A business could have plenty of working capital, but far too much of it could be in stock and far too little in the form of cash. Businesses can monitor this type of problem by calculating another ratio, the acid test ratio. This excludes stock from current assets in calculating the ratio of current assets to current liabilities: Acid Test Ratio = Current Assets - Stock
Current Liabilities
Like the current ratio, the higher the acid test ratio, the safer is the business and the less likely it is to become insolvent.
Working Capital.
Working capital is the value of net current assets; the current assets of the business left over after the current liabilities have been taken away.
Current Assets - Current Liabilities
Business Ratio’s.
Return on capital employed (ROCE)
1993 - 16,741.00
96,921.00 X 100 = 17.2%
1994 - 11,153.00
97,174.00 X 100 = 11.5%
1995 - 11,336.00
96,490.50 X 100 = 11.7%
Gross profit percentage
1993 - 20,025.00
80,100.00 X 100 = 25%
1994 - 19,725.00
78,900.00 X 100 = 25%
1995 - 20,062.50
80,250.00 X 100 = 25%
Net profit percentage
1993 - 16,741.00
80,100.00 X 100 = 20.9%
1994 - 11,153.00
78,900.00 X 100 = 14.1%
1995 - 11,336.00
80,250.00 X 100 = 14.1%
Liquidity
Current ratio
1993 - 16,375 : 10,604 = 1.5: 1
1994 - 16,198 : 10,174 = 1.6: 1
1995 - 13,720 : 10,399.5 = 1.3: 1
Quick or Acid test ratio
1993 - 16,375 : 10,604
1994 - 16,198 : 10,174
1995 - 13,750 : 10,400
External Influences.
Bank Overdrafts.
Nearly all businesses have a current account or a bank. The business uses the cash in the account to pay its day to day bills using cheques. A bank might also give the business an overdraft. This means that the bank will allow it to draw out more money than it has in its account. The maximum amount it can be overdrawn (i.e. borrow) is called it’s overdraft limit.
The great advantage of an overdraft is that money is only borrowed when it is needed. This cuts down on the interest bill. Overdrafts can be more expensive than they seem because banks often charge businesses an arrangement fee to give the overdraft and then make a fee per quarter (three months) to maintain the overdraft limit. Banks may make higher charges for cheques issued when the account is overdrawn. An overdraft is also repayable on demand. The bank can call in an overdraft (i.e. insist that the money borrowed is repaid immediately. This means that there is a risk in this type of borrowing.
Trade Credit.
This means that the business doesn’t have to pay for goods until at least one month after they have been delivered. However trade credit is not always free. Some businesses give discounts if their customers pay bills immediately. Another disadvantage of trade credit is that suppliers may stop selling goods to a business if it owes too much money through trade credit. The supplier will be afraid that the business owes too much money and may be in danger of going bankrupt or into liquidation, leaving it’s debts unpaid.
Factoring.
A factor is a specialist finance company. It collects the money, which is owed to a company by other businesses and charges a fee. The factor will pay the company even if a customer hasn't paid an invoice (a bill). So the company is therefore guaranteed regular payments of its invoices. It also doesn’t have to employ staff to chase and collect those bills. However the factor will only give the business a percentage of the bill, usually 80%. The other 20% is paid to the company when it’s customers pay the factor. The great advantage of using a factor is that it speeds up the flow of cash through a business.
Bank Loans.
Overdrafts, trade credit and factoring are different ways in which a business can increase the cash and working capital flowing round the business. However, they are not suitable ways of raising money to finance the replacement of, say, £200,000 of outdated machinery. This needs some form of longer-term finance like a bank loan.
With a bank loan, the business usually borrows a fixed amount of money and then pays it back in regular fixed instalments. These repayments include the interest on the outstanding money owed. The bank may demand security on the loan. This means that the business has to pledge assets to the bank, which the bank can sell, if the business fails to repay the loan. For instance a company could offer its factory as security or collateral. A mortgage is a type of long term loan. The money borrowed is usually used to pay for the purchase of property, such as a new building or land. The property is then used as security for the loan.
Leasing and Hire Purchase
Leasing is more or less rent. A Company might need new machinery. It could buy them outright, but it would have to borrow the money to do that. Instead, it could lease the machines from a leasing firm. Many leasing contracts also include maintenance contracts where the leasing company maintains and repairs the machine as part of the price of the rental. Leasing equipment is usually more expensive over the lifetime of the machine than buying it outright. On the other hand, it could work out cheaper if the leasing firm can buy machines in bulk and pass on the discount to it’s customers. There can also be important tax advantages to renting equipment rather than buying it outright. Maintenance contracts included in a leasing deal, whilst often expensive, reduce the risk of sudden large unexpected bills if the machine breaks down.
Hire purchase is an alternative way of borrowing money. If a company bought a machine on hire purchase, it would pay a fixed number of instalments to buy the machine. Legally, each instalment is a rental payment and the finance house, a type of bank, which specialises in hire purchase deals, would own the machine until the last instalment is made.
Debentures
Large public companies can borrow money through the City of London by issuing debentures (also called stocks or bonds). These are usually long term loans, normally for between 5 and 25 years. Interest has to be paid on the loan. A debenture where the money is in another currency is called a Eurobond. For instance, a UK company, might borrow German Deutch-marks to finance the building of a chemical plant it has in Germany. Private limited companies can also issue debentures, which is typically bought by banks.
Grants.
Grants to businesses are given by a wide number of bodies including the UK government through local Training and Enterprise Councils (TEC's) and the European Union. One very important grant offered by TEC's to unemployed people who set up their own business is the new business grant.
The TEC provides training and support. If the unemployed person then prepares a business plan which shows that the business is likely to succeed, a ‘one off’ grant of £1,000 may be given.
Recommendation
After looking thoroughly at my results in my tables and my research I can conclude that it would be the right time now to open another shop as my retained profit has increased each year since I started. It started from £11,921 in 1993 to £21,490.50 in 1995 so my business is on a high. I have a healthy account and I have had no problems in loan repayment. Also the business has good ratios, good profit and loss accounts and balance sheets for each year of the business.
I have to mention all these aspects because a bank manager would not hand out a loan if the business has a lousy record or if it is struggling for money. They have to be making a profit so that the business can be expanded. So it’s only worth applying for a loan if your business is healthy and looks to have a healthy future, like my business. My business is making around 14% net profit. My balance sheets and my profit loss accounts show that everything is in working order and there is no signs of any failure of my business. The wages of my business have gone up so that means I have a bigger work force, not by much but steadily getting bigger and I think if I can carry on going the way the business is going on now then that is a good sign.
Report
By proving from my accounts, which have been made, I am stating with all reason why I should receive a loan extension from the bank to be able to extend my current business. At the moment, each year of my business has been a progress as my sales have grown during 1993 to 1995 and so has my profit. I have always closed the yearly accounts with more money than I have opened the year with. My stock has a value of £7,630 and it is still rising. It had a value of £3,550 in the end of 1993 and this shows how much the sales-growth is increasing. I have received a lot more knowledge about my business, and I am planning already to make sure my success rate will be relatively high. As I am gaining a partner for my business, I know it will mean better control of the business. We will both run each shop and by researching well within our market, we will be quite confident about what and how to handle everything.
Introduction
In this assignment I have been told that the bank have accepted to financially help me in the expansion of my business which I had proposed for. I will have to start to consider where I will locate. My location should have suitable external influences such as potential customer usage, unemployment levels and the possible assistance by the government. The bank manager has asked me to produce a full business plan, which shows my full proposal.
My four objectives for my coursework are:
- To develop my understanding of the carious factors that influence business decision making i.e. finance, marketing, location etc…
- To increase my skills at handling information, using IT.
- To increase my skills in communicating information, using IT.
- To develop my analytical skills for business decision-making.
Eventually I will hopefully have produced a good plan, which will persuade the bank manager that he is investing the bank's money in a good business. If I'm successful I should show that: I will fulfil the customer needs by referring to my primary market research; I have made a good decision of a property by stating the reasons; I have a well chosen tactic of reaching my targets (business objectives) for my business.
Market Research
It is very good to know your market before you are entering it. As my business will involve food (sandwiches) there are a lot of different demands from different people. To be sure that I will be successful by entering the market with my product(s) I will first accomplish a market research to gain a higher knowledge of what my customers want.
I will carry through a questionnaire with my partner of this business and the questionnaire contains 22 questions, which will eventually be answered by 100 people. The answers for each question will be closed answers as we are putting in our own products in the market and we are not starting to produce something new. After we've got 100 completed questionnaires we will organise them into a database. By doing this, it will be much easier to obtain what our results shows us. It becomes even much easier to read the results when you sort the database according to different answers. I will sort the database in as many different ways it needs to be sorted depending on what I need to find out.
My questions will be based to find following things:
- Where can we find a good location?
- What type of fillings out of our selection do they prefer?
- What price area we are targeting our products for?
- How can we give a good service?
Analysing and concluding our market research
A sample of our final questionnaire is on the previous page. We made our 22 questions without any major struggles. So far we have found most of our needed figures. During giving the actual questionnaire we targeted people we are targeting our business for e.g. business people, office workers, students, usual workers and other occupied people. My partner and I split the questionnaires and we gave out 50 questionnaires each. We gave the questionnaires out in various fast food shops, to different work places and at busy large streets where you can find a lot of businesses e.g. Western Road near the town centre. We are aware of that a small amount of our research carried out, can be irrelevant or wrong. People can not be bothered to answer some questions or they answer incorrectly e.g. in one questionnaire someone had answered female, 16, retired, which shows that there can be a small error in our market research. But as we had 100 samples of results it will not affect our research very much.
If we concentrate on our results, we have to make some decisions on how we should run and manage the shop. Each of these points is responding and evaluating the question that was set in the questionnaire.
Question Peoples Response/Conclusion
- There was not a major difference in gender. 68% were male and the rest were female. This result is quite irrelevant to our business but still useful to know because it adds more information to our statistics.
- We used the age ranging under 16 to 40+ and we almost had a fair amount of answers from each range.
- As I've stated, we only targeted a specific range of people. Most of the students would prefer to buy their food outside school. This have we found in a secondary market research. We know by own experience that school canteens can be very stressful and if there are a fast food shop in a close-by area, it is usually filled with students. Sandwiches are preferred by both workers and students as it is a quick, tasty and usually a cheap option for lunch.
- A very high amount of people's businesses, offices or working places was located in Brighton so we are definitively going to locate our business in Brighton.
- 74% of peoples lunch hours are between 11 PM and 2 PM so we will maybe enquire an extra staff at those times. More information about that is written later in the part about staffing.
- The majority of people have approximately between 1-2 hours lunch hour. During this time the students or workers are trying to relax as much as possible because of the stress that is given to them. Therefor we are trying to adapt this place to an amusing place both for students and workers by having some amusing or relaxing facilities in our shop. These facilities are later being decided.
- 80% of our final results said that they would consider buying sandwich as a lunch option. This means that there is a relatively high demand of wanting sandwiches. We told people who answered "No" in this particular question that they don’t need to be bothered to answer the remaining questions because we only need to research within the "sandwich market".
-
N/A
- Most people saw the service and prices as the good points of their current sandwich-shop. Therefor we are aiming to provide a high service and competitive prices.
- Most people were disappointed with the atmosphere and the people in the sandwich-shop. To make our sandwich shop even a better place, we will try to employ outgoing and friendly staff.
- People sometimes misunderstood this question by thinking that the answers implied to money spent per week, but we meant money spent per day. This is not a major problem as we do already have a rough idea of how much sandwiches cost in today's market.
- Our good news from the market research is that only 11% of the total research were totally sure that they wouldn't buy from a new shop. This shows that we will have a high chance to receive enough customers to break even or even produce some profit.
- 80% of the targeted people wanted some sort of media available in the shop (40% radio, 21% TV and 19% Newspaper/mags). The problem is that we can't have both TV and Radio at the same time, therefor we decided to choose what the majority had chosen, Radio. We will also have newspaper and magazines available as it is a low cost and not noisy or distracting.
14, 15
16 & 17.
The selection of different food i.e. bread, filling and sauces will be available at a high variety of choices. We will have fresh food in stock at all times so that we won't disappoint our customers.
- 58% of those who were questioned weren't bothered to "take away" or "eat in" as they are also close to their working-place/school. We have decided that there will be bar tables around the wall, depending on the size of the bar.
- We are going to fill just above 10% of our stock with pre-packed sandwiches and the rest will be self-selected by the customers.
- A car park is not very necessary if we are aiming our product towards schools and local businesses.
- People who are smokers will need a smoking area because many businesses/schools/working-places are nowadays a non-smoking area. Therefor we are not restricting smoking in our shop.
- Most areas with many workers are usually set in central Brighton. Schools sometimes have more than 1000 people working or studying. Therefor, targeting our service towards schools is not a bad idea.
With all this information, I think we have a strong knowledge of today's market. I have presented my analysed results in some graphs on the next page.
Location
Finding a location for a business can be hard depending on which area we want to start the business on. If we want a higher success rate for starting our new business, we have to consider following important factors, which can be useful to be aware of when buying a new property.
Cost: As we haven't got a very large starting capital we can't afford very much. A property's price can vary depending on size of the property, location of the property and age of the property. We will target our property at a fairly good location e.g. near other large businesses, offices and/or schools, which means that it must be somewhere in/near the city centre. But this will cause the cost of our location to rise, as the cost of a location tend to be more expensive when it's closer to business areas than a location outside towns or business locations. If we do get a property outside town or away from local businesses, we can afford a larger property. The reason for that we will not locate our shop at less urban areas is that our business has no need of large land and we our aiming our products at businesses, offices and schools.
Market: We need to locate our business where the market enables us to exploit our business at the highest level possible. We have to consider where we can easily find staff. What is the unemployment level where we are going locate our business? At the moment the only information the Brighton Job Centre had available about local unemployment level within Brighton “travel to work area” (including small towns all around Brighton i.e. Lewes, Newhaven, Worthing, Shoreham) is as following. Dec 1998 there were 10.116 people representing 5.3% unemployed, Jan 1999 there were 10.045 people representing 5.2% unemployed and Feb 1999 there were 10.526 people representing 5.5% unemployed.
Government: The government can sometimes offer opportunities but sometimes it can also place restriction of the location. This applies mainly to large businesses that are building factories for example.
I called two commercial estate agencies regarding any available locations, which are suitable for a small sandwich-shop. The agencies are called "Oakley Commercial Properties" and "Graves Jenkins". They both sent me a retail property list of all the locations that are for sale or rent within Sussex. I could also look up the property list at Oakley's Web page: www.oakley-property.co.uk. The lists are both available on the next page. I will refer to these during choosing my location/property. I could also call them for an appointment to view the property. As a lack of time I chose not to do this.
We chose to call the agencies and ask for any changes, which happened because details change almost regularly.
After looking thoroughly at the different locations I have chosen three suitable locations, which I will then look closer at.
Location 1: 162 Edward Street, Brighton
Location 2: 93 Western Road, Brighton
Location 3: West Street, Brighton
Location 1: This property is situated in an excellent location, close to many large governmental and private businesses, in a walking distance. The ground floor is the sales/take away area, which is an area of approximately 137 square feet. There is a rear kitchen (96 square feet) and it has a basement of approximately 201 square feet which is suitable for storage of stock. Cost of this property is either £7,500 p.a. or £67,500 for the leasehold. This is very suitable for our shop.
Location 2: This property is situated in the absolute centre of Brighton. It is opposite Waitrose Supermarket and quite large (610 square feet sales area and an total of 1346 square feet office and lower ground storage). There is a very large competition in this area, with plenty of fast food restaurants and takeaways. The price for this location is £19,500 p.a. but the estate agent told me that the property's price has come down to £17,000 p.a. but still this is very expensive.
Location 3: A quite large restaurant, which is located in a very busy area, by cinema's and arcade stores. This prime restaurant is suitable for a large sandwich bar restaurant for weekend evenings. It is very large with 2,250 square feet split level. It is near the "Boots" chemist and is visible from the clock tower. The price for this is 16,000 p.a. and this is not exactly a type of shop we are looking for, as it is more restaurant-like.
Our final decision is clear and we have chosen "location 1", Edward Street. There is an enclosed map below to show its locations.
This location is close to American express at its north-west side (which has approximately over 400 employees), a law court is just by the road and a police station 5 minutes away from the shop. Royal Sussex County Hospital is approximately 10 minutes walking distance away. Brighton collage (with approximately 300 students and teachers) is also situated in its north just 5 minutes away as well. One building, which belongs to Brighton University, is also at the beginning of Edward Street. This covers our wants by 100% so far. The space inside the property is enough and the cost is reasonable. The estate agent said that the price for this location also had decreased to £6,900 p.a. or £66,200 for the leasehold.
Our main problem of this area is the competition. Many collage students can go to Macdonald's or KFC, which is close to the collage at London Road. There is a Chinese takeaway close to this area and a fish and chips shop by the grand parade. There are two kebab/hamburger/pizza shops in the area and a bakery near the police station. If we gain a good reputation at the beginning we can be sure that it will be easy to break even/receive large profits.
This location won't bring any problems with employment, as it is easy to access with many busses going through this street from western road and other important places.
Here below you can see a picture of the shop:
Opening hours
Our big mistake in our market research was that we forgot to ask if people ever buy sandwiches in the mornings to takeaway for later or have instead of breakfast. What I did instead was that I called up different sandwich shops and asked about their opening hours.
These are my sources (all in the yellow pages):
- Sandwich Masters - Brighton (01273 272 720)
- Options Sandwich Shop - Brighton (01273 57 00 62)
- The Sandwich Bar - Worthing (there were no permission given for the use of their phone number)
One of them said "People do prefer to buy their lunch in the mornings and then skip to wait in a long queue during their lunch hours". That made me decide to open early in the morning.
As I am only selling sandwiches (and maybe food drinks and/or crisps) and not selling other fast food I will aim my shop to schools, offices and large business. Therefor I will not open during weekends or after 15:00.
My final decision of opening hours are as following:
Monday - Friday 7:00 AM - 15:00 AM
Saturdays and Sundays Closed
Employment
Who will I employ?
For my business as, I will have my opening hours from 7:00 in the morning to 15:00 PM; I will obviously require some extra staff to work with me. First of all I will need a person who takes responsibility for all the cooking and sandwich preparations, someone who has experience in this area of work. I will also need a full time staff who will work for the "more professional" chef, to take orders from him to do different work such as cleaning and serving and maybe even cooking. My third staff will be a part-time waiter/cooker/cleaner, and he will work at the busier times e.g. 11-2 where most of the people have lunch hour according to my market research.
To be more specific on how to employ people I will rely on the information on wages and work-times from Sussex career centre:
Employee # 1: I will be the first employee and I have the duty as the manager. My partner and me are going to be the owner of this sandwich shop and we are the managing team. I will mostly make sure my business is run properly, give the shop a good reputation by promoting it through different sorts of media and flyers and I will also help in the shop with preparing sandwiches or work at the till.
Employee #2: This Employee is formerly known as Ehsan Salehi and he is my partner in this shop. We will first write a contract (deed of partnership) and we are both the bosses of this shop. He will take care of our finances as he has the largest start capital. He is also skilled as an accounter, which makes our accounting much easier. Ehsan is not going to work in the shop as often as I do.
Employee #3: As he/she should be semiskilled and/or with past experience plus he/she is going to work full-time this person should have a fairly higher wage Something between £3.95/hour and £4.50/hour. He/she is responsible for the 2nd employee…
Employee #4: This person doesn’t need to be very experienced and is mainly doing the cleaning, serving, shopping and other different kinds of small work therefor he/she is only receiving approximately £3.50/hour. We will target this vacancy to a university student who not only will need the money but maybe also the experience.
Employee #5: If my business is set up properly and everything happens as expected, I will employ another staff when my shop becomes more successful and busier. This person is working part-time during the busy hours and he/she will mainly prepare sandwiches, take the orders at the till and also be a cleaner/cashier. He/she will work between 10:30 AM and 14:30 PM (4 hours). The wage for this person will be around £3.50/hour and we will target this vacancy to a university student as well.
Ehsan Salehi (Employee 2) and me are the owners of he shop and we are partners. This brings many advantages. One of them is that we are both putting money in the business and the money we are starting off with is higher. We will also need to employ fewer staff because we are already part of the staff. As we are both well motivated and enthusiastic about starting this business, the success rate will also be higher.
We have decided that this business should have a deed of partnership contract. This is written (legal) document, usually written by a solicitor, which states the following:
- Who the partners are
- How much money (or capital) each partner is investing into the business
- How the profit is being shared out
- How many votes each partner has (used in partnership meetings)
- What happens if any of the partners wants to withdraw from the business
- What happens if new partners are brought in
This deed of partner ship contract is given to both of us and we are supposed to sign this contract.
THIS DEED OF PARTNERSHIP is made the first day of March - 1999 BETWEEN
- ABBAS GHOLI of 3 Chatsworth Road, London (Mr GHOLI); and
- EHSAN SALEHI of 9 Woodland avenue, London (Mr Salehi)
WHEREAS
- Mr Salehi and Mr Gholi have agreed to enter into partnership together to practise as a sandwich shop business.
- Mr Salehi has put out a capital of £10,000 into the business, which will be shared out to buy equipment and material for the business.
- Mr Gholi has put out a capital of £10,000 into the business, which will be shared out to buy equipment and material for the business.
- The profit from each month will be shared out to Mr Gholi and Mr Salehi equally, which means 50% each.
- There won't be any partners brought into this business, unless it is expanding. The decision of a new partner has to be decided by both, Mr Salehi and Mr Gholi by interviews.
- If either Mr Salehi or Mr Gholi, withdraws from this partnership they will only receive 20% of the profit present from the last month and notice must be given within 2 months. If the business is in dept, 50% of it must be paid within 30 days.
Each partner should hold one copy of this document and the solicitor should hold the original document.
Equal Opportunity
All of the employees above will be employed in a so called equal opportunity which means that I will employ people, no matter age, sex and race but I have to consider health and hygiene as my shop will involve food business. A small guide is included below about how I should employ people and how they should be taken care of.
Race and Sex: Jobs, training and promotion must be open for all regardless colour, race, nationality, ethnic or national origin, sex, martial status or sexual orientation except for possible following circumstances referred to in the law. In certain cases e.g. genuine occupational qualifications, private households, training skills to be used abroad and seamen recruited abroad is not included in the Race Relations Act 1976.
Disability: If our business would have 20 or more employees the Employment Provision at the Disability Discrimination Act 1995 would apply to us but as we are having a maximum of 5 employees, this law is not affecting us.
Employee Rights
- If a person is employed for more than a month, I have to write the employee a written statement of main employment particulars within first two months. The statement must include main terms and conditions including pay, holidays, details of notice and disciplinary procedures.
- Men and women must get the same pay for the same type of work and/or work that is worth equivalent.
- If I haven't stated details of notice in my written statement, the employee must give at least a week notice if he/she has worked less than 2 years but more than a month. The employee must give 2 weeks notice if he/she has worked for more than 2 years.
- Illegal working is something I should be aware of. I can risk prosecution if I employ an illegal worker. I can avoid this risk if I make certain simple checks on new employees. My checks can be satisfied by seeing a P45 or P60 document or a former payslip showing the National Insurance number (NI Number).
As I have pointed, the unemployment level is not changing dramatically. It varies time to time. It is not very high, which is a good point, otherwise there won't be many people who buys sandwiches as they can just make their own at home. Instead there are many people employed in my chosen area which means that my customers won't have much time to do their own food and they will no have money available as well.
Sources of Finance.
My source of finance has been declared and explained in the first chapter. Businesses need money to start up and run their operations. One way of getting this money is for the business to attract capital - where another business or individual puts money into the business in return for a share of the ownership.
For our business, my partner and I are each putting in £10,000 in the business from our savings. We are receiving £5,000 from our families as well to help us start of this new business. We are also assuming that the bank will lend us £10,000.
Raising capital for a small business.
It is sometimes very difficult for small and medium sized businesses (like partnerships or private limited companies) to find someone prepared to become joint owners. When found they are often:
- Members of the family, like a parent or an uncle;
- Friends who can see a good business opportunity;
- People known through work;
- People who want to set up in business and also need to find someone prepared to invest in the business.
Share Capital for Larger Businesses.
One of the reasons why larger businesses become public limited companies is because they find it easier to sell new shares in the business. A new share issue by a public limited company is likely to be organised by a bank or a merchant bank. It might offer the shares for sale to the general public, or it could sell the shares to existing shareholders.
Retained Profit.
In any one year, only a few per cent of all the money to finance investment in the UK comes from raising new capital. The most important source of finance is retained or undistributed profit. This is profit, which has been made by the business and is not distributed to the owners of the business. Instead, it is kept back, or retained. Retained profit is an internal source of finance because the money has come within the business. New capital in contrast, is an external source of finance because the money comes from outside the business.
Other Internal Sources of Finance.
Another way for a business to raise money internally is to sell assets. Larger businesses might be able to negotiate a sale and leaseback scheme. Here the business sells some or all of its property to another company, like a property company. At the same time, it signs an agreement to lease back the property for a fixed annual rent. The business receives a lump sum of money, which can be used to pay for expansion. The drawback is that the business now has to pay rent on the property.
I think that by now with all these collected information, I can easily produce a Business plan and then a cash-flow forecast and maybe a profit forecast. I will do this with some help from a bank. This particular bank has given me the resources of making a business plan and a cash-flow forecast. The cash-flow forecast and the business plan is based on my research and will be seen at the next page.
