Business Finance: Sources, Working Capital, Risk, and Corporate Restructuring

This report provides detailed information about business finance, including key sources of finance, elements of working capital, exposure to risk, and corporate restructuring activities. It focuses on ASOS plc, a British online fashion and cosmetic retailer, and discusses various financial decisions and strategies implemented by the company.

Business finance

Table of Contents
Introduction......................................................................................................................................3
Key sources of finance.................................................................................................................3
Key elements of working capital..................................................................................................4
Exposure to risk...........................................................................................................................5
Corporate restructuring activities of ASOS plc...........................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

Introduction
The following report focuses on Business Finance. Business Finance refers to raising money and
properly managing the points with the help of Management and business organisation (Klopotan
and et.al 2018). Business Finance also includes major financial decisions for the company. In this
report company calls ASOS plc has been taken. ASOS plc is a British online fashion and
cosmetic retailer. Its Headquarter is situated in London. Clothes, shoes, accessories and beauty
products are the major products of this company. Report States about key sources of finance for
the company apart from this various key elements of working capital is being discussed in this
report.
Key sources of finance
Images of sources of finance for any business are equity debentures term loan working capital
loan and venture funding but these sources of finance can be used in different situations apart
from this their sources of generation depends on the period ownership and control in the
company. ASOS plc implements various kinds of sources to get funds
Equity share
Equity share are the main sources of finance for ASOS plc as it provides different rights of
voting share profit to the investors (Kraemer and et.al 2019). Which company has issued various
types of share capital such as authorised issued subscribed paid up and it also provide right bonus
to the shareholders. Equity shares are the first choice of ASOS plc to collect fund from different
high net worth and retail investors. Earlier company has issued initial public offering to get listed
on London stock exchange through which this company get good subscription and funding for
further growth.
Debentures
Debentures are the way of borrowing money by the company on a fixed and floating rate of
interest without keeping any asset of the company in the form of securities (Ylhäinen, 2017).
This is one of the convenient ways of getting money on long-term basis without putting any other
side of the company. ASOS plc has issued debentures to get long term finance so that company
can go for further expansion. Avengers are generally written contract which states that company

will repay the principal amount along with the interest payment to the debenture holder so that
investor also get return on fixed and floating basis.
Preference share
Preference share are also one of the long term sources of finance for ASOS plc. Preference shares
are also special type of share capital which provides fixed rate of dividend to the preference
shareholders (Mian and et.al 2018). As the news suggests preference shareholders have some
preferential rights that they may get dividend before equity shareholders. This is one of the
convenient ways of getting long term finance sum different investors so that company can invest
the money to earn profit and expand the business.
Bank loan
Bank loan is one of the easiest and convenient ways of getting Finance for long term basis
(Greenwood and et.al 2020). But for bank loan company has to put collateral and asset to the
bank so that they can easily pass loan to the company. When company go for bank loan then it is
the responsibility of ASOS plc that it must repay the loan amount and also pay the interest
amount to the bank.
Gearing ratio
Gearing ratio states that how a company is using that and other Finance from shareholders to
fund their operations. This company is properly using finance to operate their operations (Foster
and et.al 2019).
Key elements of working capital
Working capital is the difference between total asset and total liabilities of the company (Luyckx,
2020). Every business in company needs working capital to find its day to day operations. ASOS
plc also needs working capital so that it can provide find in the form of wages and other expenses
to the Employees. Working capital is a cycle of 30 to 90 days and which the raw material get
converted into finished goods and then it further get sold in the market but until the products gets
old company in which fund is needed for the payment of expenses of 30 to 90 days for that
company needs working capital. Major elements of working capital are
Cash management
Cash is one of the critical components of current assets of the company (Bhankaraully, 2019).
Cash is being needed by ASOS plc to perform all the activities whether it is the purchase of raw

material or finished goods. For that it is necessary for ASOS plc to maintain adequate cash
balance.
Receivable management
Receivable refers to the Sundry debtors of ASOS plc (Lamber and et.al 2018). It shows the
claim money by the company to those debtors who have not paid the money of products to the
company. Receivables are one of the crucial components of the working capital.
Inventory management
Inventory management is one of the major parts of working capital of ASOS plc. If the company
is efficient in managing inventory then it may result in earning high profit and provide maximum
return to the shareholders (Mohamed, 2020). Effective inventory management contain two
important objectives first is maintenance of smooth flow of operations and another is reduction in
the investment of inventory. Working capital has been strength if ASOS plc as the company is
effectively managing the working capital to repay the debt and obligations especially those which
are on short term in nature (Le and et.al 2018). A part from this, ASOS plc is effectively
providing fund to their workers and staff by using working capital efficiently specially in the
duration of 30 to 90 days.
Exposure to risk
ASOS plc has to face various risks to survive in the international market. The main risk which is
being faced by the company is foreign exchange and political risk (Le, 2019). As this company
operates in different countries so ASOS plc has to follow all the rules and regulations of each and
every country.
Foreign exchange risk
Foreign exchange risk takes place due to the fluctuations in the exchange rate of currency.
Foreign exchange risk is also known as currency risk and exchange rate risk (Panda and et.al
2018). ASOS plc has to face loss when the domestic currency as compared to foreign currency
then the return earned by ASOS plc in foreign countries gets decreases after getting back to their
home country. This risk is hard to mitigate by the company as it occurs due to the volatility in the
exchange rate.
Political risk
Political risk is also known as geopolitical risk. This risk occurred to company when the
government of those countries where ASOS plc operates unexpectedly make changes in the rules

and regulations (Dhole and et.al 2019). Especially when the government make changes in the
taxation policy so it puts inverse impact on the profitability and return of ASOS plc. A part from
this, political changes include trade barriers and tariff. Along with this government of few
countries demand buffer fund from the companies in the form of tariff on the exchange of their
exported item.
Regulatory risk
Regulatory risk takes place due to the poor regulations and inappropriate trade lows. Apart from
this changes in banking lows may affect the business of ASOS plc in other countries (Sawarni
and et.al 2020). For example if the company do not have proper property low and business trade
lows then it will become difficult for ASOS plc To open their physical stores in such countries.
Country risk
To set up the physical stores in different countries ASOS plc has to choose such countries where
the people can afford the products of ASOS (Pakde and et. al2019). So the selection of country
is also important as the company has to check the economic condition and potential of people
whether they can afford the products or not. Apart from this, ASOS plc can’t operate in where
terrorism, internal dispute and civil unrest are present as this issues damage the overall
profitability and revenue of the company. Besides this, ASOS plc has to select such country
which does not include any kind of corruption and criminal offence because it directly damages
the goodwill and reputation of the company.
Corporate restructuring activities of ASOS plc
Corporate restructuring is the procedure of taking various actions by the company to change in
make certain modifications in the capital structure so that it can operate effectively (Acceleration
of ASOS Brands strategy Acquisition of Topshop, Topman, Miss Selfridge & HIIT, 2021).
Corporate restructuring occurs when the company faces any kind of issues and financial
jeopardy. Asos PLC has conducted corporate restructuring due to lack of profit and making
certain changes in strategic apart from this company wants to stabilize its cash flow requirement.
Takeover
ASOS plc has bought one of the Britain’s big brands Topshop by paying approximately $405
million. So that ASOS plc can increase the swoop of purchasing their product with the help of
online website of Topshop (Corporate Restructuring – Meaning, Types, and Characteristics.
2021). The main motive of purchasing Topshop is that ASOS plc wants to increase their online

sales apart from this ASOS plc wants to reduce competition as well, because Topshop is dealing
in the same products.
Acquisition
ASOS plc has acquired Miss Selfridge and HIITAA brands to become a strong iconic brand in
fashion industry. The main motive of ASOS plc behind this acquisition is to increase the
customer base and also the revenue of the company. Another reason behind this acquisition is
that ASOS plc wants to expand in UK, UK and Germany (Annual report Assos plc, 2021 ).
Along with this, company wants to give ample of choices in the product range customers so that
they do not switch to its competitors. Another reason for this equation is that which company
wants to become market leader by providing immense options to the customers and it wants to
overlay the world class designs so that the marketing capabilities of this company also get
increases and it becomes a strong brand in the world. But from this company wants to gain
financial benefit by the acquisition and takeover so that company can get more returns and
revenue apart from this ASOS plc can easily use the Assets of these companies to increase their
production and sales (Westone. 2021 ). So the major reason of all this corporate restructuring of
ASOS plc is that they want to tap into those countries where ASOS plc is not present and provide
various choices to the customers so they forget to buy local products and become loyal customers
of ASOS plc. Apart from this ASOS plc wants to make certain development in their application
and have to introduce new fashion led labels and provide various payment options to the
customers.
Conclusion
From the above report it can be concluded that this report focuses on Business Finance. It
provides detailed information about sources of finance and how company can use such sources
for further development. Along with these key elements of working capital is also mentioned in
this report. This report shows various information about all the expected risk which company has
to face in international market. It also includes corporate restructuring of the company and how
companies taking advantage of such activities.

References
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Online
Acceleration of ASOS Brands strategy Acquisition of Topshop, Topman, Miss Selfridge &
HIIT.2021 [online] Available through : <
https://www.asosplc.com/~/media/Files/A/Asos-V2/reports-and-presentations/2021/
ASOS%20Acquisition%20TS%20TM%20MS%20HIIT.pdf>
Annual report Assos plc, 2021 [online] Available through
https://www.asosplc.com/~/media/Files/A/Asos-V2/reports-and-presentations/2020-
annual-report.pdf
Corporate Restructuring – Meaning, Types, and Characteristics., 2021 [online] Available
through : <https://cleartax.in/s/corporate-restructuring>
Westone. f , 2021 Busienss finance [online] Available through: <
https://www.britannica.com/topic/business-finance>