Financial Analysis and Management: Assignment Solution

Financial Analysis and Management:
Part 2

TABLE OF CONTENTS
1. INTRODUCTION.......................................................................................................................4
SECTION 2: EXTERNAL SOURCES OF LONG TERM FUNDS...............................................4
2.1. Suggesting alternative methods of funding to the Board of Directors............................4
2.2 Other long-term source of finance....................................................................................8
2.3 Methods that AB plc might raise external equity funds...................................................9
2.4 Methods that AB plc might raise external long term debt funds......................................9
2.5 Stating factors that need to be considered while raising funds from debt or equity........9
SECTION 3: CRITICAL DISCUSSION ON THE SUITABILITY OF SUCH FUNDS TO AB
PLC................................................................................................................................................10
3.1 Internal factors................................................................................................................10
3.2 External factors...............................................................................................................12
SECTION 4:...................................................................................................................................13
4. Link between financing and investment decision in relation to the acquisition aspect....13
of unlisted company.............................................................................................................13

CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

1. INTRODUCTION
In the context of business unit, financial analysis and management is highly essential for
the attainment of organizational goals & objectives. Financial analysis implies for the process
which in turn lays emphasis on evaluating business projects, budgets etc with the motive to
determine their suitability. Further, financial management refers to the manner in which funds
are managed within an organization. The present report is based on the case scenario of AB plc
firm which involved in the construction of residential property. Now, business unit is planning to
explore business operations and functions with the motive to attain success. Hence, in this, report
will provide deeper insight about different funding sources which can be undertaken by the firm
for expansion purpose. Further, report will also shed light on the interrelation between financing
and investment decision with regards to acquisition aspect of unlisted firm.
SECTION 2: EXTERNAL SOURCES OF LONG TERM FUNDS
2.1. Suggesting alternative methods of funding to the Board of Directors
On the basis of cited case scenario, AB plc wants to expand into new geographical region
for enhancing financial performance of the firm. Hence, for investment purpose, firm requires to
take resort of funding sources available. Case clearly reflects that business organization could not
raise funds by undertaking internal sources. Thus, there are several external sources available
which AB Plc can use for meeting financial requirements such as:
Debt financing: The term Debt Financing is a process when the company raises or
borrowed money or funds for meeting the working capital requirements or other business capital
expenditures by offering of bonds, bills for sale to the individual or institutional investors. These
creditors receive a promise for getting repaid the principal and interest amount on the debt. The
Debt financing methods includes the following:
Bank loan: To expand the business, bank loan plays an important role in the company
which provides a safer view for expanding their operations and business activity. ABC plc can
prefer this method as the loan is easily available to the companies and they provide at very low
rate of interest. They are mostly secured and contains varieties of term loan in the market. Bank
provides loans on the basis of various according to the needs and usage of expansion. Mostly