Coursework Assignment 2 Answer Template

Coursework assignment 2 answer template997Coursework submission rules and important notes
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To be completed before submission:
Word count: 2801
Start typing your answer here:
Introduction
CED PLC is an international manufacturer which actually produces the aircraft engines
manufactured by the business. The financing solution in the business further needed to be
detected and further installation of the same is needed in that case. The operational
difficulties must be experienced with a major decrease in the maintenance cost of the new
engines. As reported by the airlines using the new engine, operational difficulties have been
experienced along with a significant increase in the maintenance costs associated with the
aircraft engine.
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January 2019

Coursework assignment 2 answer template997CED PLC has reported a defect in the design of the turbine blades of engine needs to be
reported. The cost which are incurred by the CED includes the manufacturing of the turbine
blades along with the engines which are installed in the aircraft and compensation needed to
be made in that case.
Currently, CED deals with the significant manufacturer of the firm which may results in the
business prospects of the firm. The significant accumulation of debts over the last few years
are actually required by the business for the purpose of manufacturing the machines. The
share price of CED has doubled due to the fact that the success in the newly manufactured
engines will definitely enhance the business prospects of the firm and the overall
performance of the company.
The post financing solution of the company are needed to be discussed based on the post
financing solutions of the company. The financing solutions have both the advantages and
disadvantages which must be dealt by the upper level management of the organizations
accordingly. The financing solution of the business have both the advantages and
disadvantages associated with the business.
Post-Loss Financing Solutions
The two suitable post financing solutions are as follows:
1. Self-Insurance
2. Commercial Insurance
Self-Insurance
The company actually needs to consider the insurance which is actually quite needed to
create an impact in that case. The significant debts are associated with premium which
further becomes difficult for the company to meet the premium requirements. The insurance
in that case are needed to be resolved in case of the loss in finance which may be about 400
million pounds. Such huge amount are paid through the third party activities which are
related to insurance. Taking the additional loan is quite likely that the company may end up
in the bankruptcy and further it is needed by the upper level management of the firm is
required. Self-financing its insurance through either income stream portions or captive
insurance can lead to significantly better output and therefore, ensures the semblance
stability and liquidity during its course of financing its losses.
Self-insurance are further followed by the company in order to double the share price of the
business. The floating of additional capital in the market is also required by the company
which may take place in the long run. The performance boost in the financial statement of
the company is needed by the potential investors for the purpose of enhancing the business
prospects of the company. Additional capital in that case are needed to finance the losses
for the purpose of redesign and replacement of the turbine blades. The compensation of the
aircraft grounds are required which actually leads to the main reason behind the airlines
expenses to suffer. The financing issue which acts as the compensation of the aircraft is that
the airlines needs to deal with the expenses of the company. In case of the aircraft business,
the employees actually receives the higher compensation when receding in the ground state.
In order to reduce the compensation losses, the company would need to use available
resources to redesign and manufacture replacement turbine blades on an immediate basis.
This portion of the losses can be effectively financed by the company itself through equity
financing. The balance sheet includes the expenses which is needed to remanufacture the
blades of the airline for the purpose of immediate sales. It should also look into halting
installation in further aircraft, to limits its exposure of losses to limited airlines.
2
January 2019

Coursework assignment 2 answer template997A captive insurer is a form of self-insurance where the parent company further creates
insurance in order to finance the business losses associated. It is actually quite significant
for the business to manage the finance by expanding the exposure of the company. The
expansion of the business actually happens if the profit of the business is made by the
company. The insurer further generates profits in the business which actually utilized by the
parent companies by making the potential investment in the business. It is a suitable method
of self-financing its losses through captive insurance for CED PLC. The limitation on its form
of refinancing is that it should use it asses its cash flows such that the compensations are
effectively made to the airlines that are experiencing issues with the installed engines.
The self-loss financing for CED will be required by the company for the purpose of the
decision making process. Therefore, conclusively, the first solution for post-loss financing for
CED is self-insurance. It can be broken into two portions. The equity financing considered as
the floating of shares in the market in order to attract the potential investors in the business.
Firstly, using equity financing through floating more shares in the market to attract investors,
to finance its redesign and re-manufacturing for the turbine blades that need to be replaced
and reinstalled in the affected aircraft. Secondly the captive insurer needs to transfer the
potential loss of the business to the owners in order to meet the risk associated with the
business. It is suitable for CED PLC to manage its losses through a self-insurance scheme,
or at the very least, use it to minimise its expenditure.
Commercial Insurance
The commercial form of insurance is referred as the third party insurer who actually deals
with the potential loss in the business. The purpose of the insurer is to provide financing in
the business where the affected parties in the scenario are further dealt with the company
which is the CED PLC. The airlines in that case needs to install the new engines in the
business for the purpose of decision making.
Commercial insurance is a straight-forward process providing relevant assistance on behalf
of the insurer party. CED PLC would be required to pay off the set of payments which are
involved in the financing cost of the relevant accommodations made by the company.
Assuming local clients, the company would not be exposed to exchange rate or similar
overseas risks associated with the transactions that would fluctuate the cost of repayment.
Therefore, the line credit is significantly required by the business through the process of
generating insurance for the purpose of compensating the airline aircrafts during the
maintenance and replacement of the turbine blades. Therefore, the cost of production and
manufacturing is something CED would be bearing on its own expenditure. CED would
require financing it's manufacturing through its own income stream, preferably through its
income profits or through equity financing. Debt financing is currently not an option
considering the large amount of debt that the company has already incurred due to the
manufacturing of the engines that were unfortunately found to have an inevitable defect.
CED PLC needs to avoid the circumstances currently for the purpose of financing the losses
which took place during the event. For future references; however, it should perform stricter
quality assurance checks to ensure such occurrences in future are avoided at all possible
cost.
Commercial insurance is one of the solutions which actually took place based on the report
of the company which is CED PLC. Due to the current loss it is needed to providea stable
support to the losses which actually occurred. The significant coverage is case of insurance
for the purpose of compensating the occurrences of the clients. The commercial insurance is
needed in the future which actually consists of the low frequency and quite affordable in the
future. Based on the present situation it is needed to adopt the most appropriate solution
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January 2019