Operating numerous subsidiaries Question Answer 2022

FINANCE

Answer 1
One of the business organisations that I would like to work with is the well renowned
Woolworths Group. The company is majorly engaged in the retail business. The business
segments of the entity include the supermarket food, merchandise, liquor, hotels, pubs and
others, in Australia and in New Zealand. It has also expanded in the area of Financial
Services and Insurance. The entity operates through its numerous subsidiaries and brands.
Some of the chief brands of the entity in the supermarket sector are the Delicious Nutritious,
Essentials, Frey, Macro, Gold and others.
Answer 2
Some of the major financial decisions that would be required to be taken as the owner
manager of the business are listed as follows. The first decision is financing decision that is
the components in the capital structure of the debt and equity depending upon the factors of
risk and ownership. The second decision is expansion decision as per the financial feasibility
of the projects. An estimate of present and future cash flows would be required to be analysed
to review the mergers, acquisitions and similar expansion decisions. Lastly, the decision
would involve the maintenance of the liquidity for the conduct of the day to day business
operations.
Answer 3
The organisation functions through the company form of business structure. The advantage of
such a business structure is that the liability of the owners is limited to the extent of the
amount remaining unpaid on the shares bought in such business (Research Guides, 2020).
Thus, the personal assets are secure. Moreover, as the large numbers of shareholders are
associated, there is an advantage of large capital base which further allows efficient conduct
of business. However, the company form of business structure has limitations as well. The
management of the company is complex and involves numerous legal formalities such as
maintenance of accounting records, filling of returns, and others. In addition, the ownership
and control over the affairs of the business is diluted.
Answer 4
As the company management is complex, it is significant to hire the professional managers
for the conduct of business. The potential agency issues that may be faced can range from the

conflict of interest leading to accounting frauds, leakage of crucial business information in
the market, unauthorised use of the resources of the entity and business decisions taken for
the personal benefits. The means that can be adopted to counter such agency issues are
efficient and clear formation of the contracts, implementation of efficient control measures
such as incentive systems, code of business conduct and undertaking disciplinary measures
wherever necessary.
Answer 5
The three key factors that must be considered before the decision to acquire a business are
position of the existing cash flows, profitability and assets; existing contracts and standing
liabilities; and the levels of technology upgrading and training of employees.
Cash flows, profitability and assets: It is important to examine the financial mileage in
terms of the products and services offered product mix, working capital approach, types and
amounts of the assets to assess the efficiency of the business operations.
Existing contracts and standing liabilities: It is important to review the existing contract,
liabilities, on-going legal proceedings, regulatory actions and other supplementary financial
information. In addition the motive of the sale of such business must be reviewed.
Levels of technology upgrading and training: In the changing and complex business
environment of present times, it is important that the rival business leads to economies of
scale and that is possible when the same is in line with the modern technologies and the
employees are updated.
Answer 6
Option 1 NPV: 156417
Option 2 NPV: 117224
Option 3 NPV: 129021
As per the comparison of the options, it is recommended that the option 1 must be chosen
over the others. This is because the said option has the highest net present value than the
others.