Financial Management and Investment Strategies for Businesses

TMA

Table of Contents
MAIN BODY.......................................................................................................................3
Question 1. Give suggestions on current investment and the amount which she is liable for in
every situation:..........................................................................................................................3
a) If Amy’s Ballet studio is a sole proprietorship that is owned by Mrs Pho.............................3
b) If it is a partnership that is owned in 60:40 ratio by Mrs Pho and Mrs Mitchell...................3
c) If it is a private limited company owned in 80:20 ratio by Mrs Pho and her sisters..............3
d) Main differences between partnership, sole proprietorship and private limited companies
in term of access to capital, distribution of profit and decision making as well............................3
Question 2. State reasons in context of agency issues within Green future PLc also recommend
alternative funding which must be considered...........................................................................4
Question 3 a) Examine whether it is financially fruitful for organisation T4 to enter into factoring
arrangement..............................................................................................................................5
b) Identify and describe the similarity and variation between bond and bank loan from business
point of view..............................................................................................................................6
c) State advantages and disadvantages for raising funds with the help of issuing stock or
through borrowing.....................................................................................................................6
Question 4. A) State necessity of current bank overdraft within Cravniosk Ltd’s liabilities. In
what manner bank must react to such situation justify your answer...........................................6
b) Explain which among the given alternative sources would better suit the business. Provide
justifications...............................................................................................................................7
CONCLUSION.....................................................................................................................7
REFERENCES.......................................................................................................................8

MAIN BODY
Question 1. Give suggestions on current investment and the amount which she is liable for in
every situation:
a) If Amy’s Ballet studio is a sole proprietorship that is owned by Mrs Pho.
It can be observed that if Mrs Pho has to act like only owner in the business then the
liability which she would be possessing would be equivalent to 1,45,000 which includes and
states the investment made by her in the business initially which she has to cover by carrying
out activities and operations in a effective and efficient manner. Further there are financial
debts of 95000 prevailing around the surroundings of business for which she has to plan its
business accordingly well in advance in such a way that she is able to cover such debts at first
place and then generate required profits for planning budgets keeping future in mind
(Alareeni, 2018).
b) If it is a partnership that is owned in 60:40 ratio by Mrs Pho and Mrs Mitchell.
The situation if would be of Partnership it would have been much easier for both
partners to share losses, cover debts and also generate profits by planning activities. Mrs Pho
is liable to cover a amount of 87000 whereas Mrs Mitchell is liable to cover a amount of
58000 which would help them to maintain stability as well as sustainability in marketplaces
in which it is working and functioning.
c) If it is a private limited company owned in 80:20 ratio by Mrs Pho and her sisters.
In this case Mrs Pho would be liable for 116000 whereas her sisters are liable to cover
29000 for the business well being with time. It is thus observed that it is more likely to be a
tough situation for Mrs Pho when compared with her sisters.
d) Main differences between partnership, sole proprietorship and private limited
companies in term of access to capital, distribution of profit and decision making as well.
Main variation observed between three choices are as under:
Sole proprietorship: In case of Sole ownership only one person is liable to collect
payments, make payment and also enjoy the generated profits. He/she would be induldge into
activities such as maintaining useful records and managing the work carried out by them. It
includes risk and threats to be managed and looked after by only one sole person and it might
lead to mismanagement of records as well.
Partnership: In case of partnership deed the risks, the money invested and the revenue
earned is distributed between them in a ratio in which they have invested in the company.