SBLC7010 Financial Analysis and Management - Assignment
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Financial Analysis and Management (SBLC7010)
Added on 2020-04-21
SBLC7010 Financial Analysis and Management - Assignment
Financial Analysis and Management (SBLC7010)
Added on 2020-04-21
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Running Head: Financial analysis and management 1Project Report: Financial Analysis and Management
Financial analysis and management 2ContentsIntroduction.......................................................................................................................3Ways through which company could raise the funds.......................................................3Financing decision and investment decision....................................................................7Recommendation and conclusion...................................................................................10References.......................................................................................................................11
Financial analysis and management 3Introduction:This case depict about a company which is trying to buy the shares of an unlisted company. In this report, various ways has been analyzed through which the company could enhance the funds and raise the funds from various available sources. In this report, AB plc’s case has been studied and it has been found that this company is trying to acquire an unlisted company to grab the market share and entire into the new geographical area. Further, it has been analyzed that the company would required some funds to offer the acquire condition andthe contract to the unlisted company. The management of AB plc has said that do not have enough internal source to raise the funds. Now the company could only raise the funds from external sources which must be analyzed and identified by the company through investigatingover various factors of the company. This case depict that if the AB plc wants to acquire the unlisted company than company has to pay 25% of total market capitalization to the shareholders of unlisted company and thus it is a big amount for the company to raise and manage the funds and administer the financial position and the capital structure position of the company perfectly. Currently, the funding off the company s dome only through the equity stock to manage the risk of the company and company also finds it, the easiest way to manage and administer the position and performance of the company. In this report, various ways of funding has been analyzed which could help the company to enhance the funds as well as the financial position of the company and further, it has been decided in this report that which factors and funds are the best option for the company to enhance and analyze the funds. Ways through which company could raise the funds:1.Equity financing:Equity financing is the procedure of raising the funds through issuing the shares in the market. This financing essentially express that the ownership is sold by the company to raise the funds for the betterment of the business. Equity financing spans various activities in scopeand scale from a few amounts which has been raised by the company from various other sources. Basically, a public and listed companies use this source to raise the funds from the market (Kruth, 2013). It is quite different from debt financing where the funds are raised by the company through borrowings.
Financial analysis and management 4Equity financing is the cheapest source and the most used source. In this the companies come up in the market with IPO and sale out its share in the market and through collecting the amount from selling the shares, they use the funds to manage the operations of the company to invest into the new activities of the company (Krantz, 2016). For raising the funds from equity financing, company is just required to announce the new shares. The share price of the stock varies according to the comapny position in the market and the economical position of the country.According to Kinsky (2011), it is the best option for every company to analyze the market position and make a better decision about financing accordingly. Hongren (2009) has depicted into his study that the fund rising from equity is the risk less option because in this position, the company is not required to pay back the amount to the shareholders. Further, it has also been found through the study of Hopper, Northcott and Scapens, (2007) that if the funds are raised by the company through the equity than the solvency position of the company becomes better as the extra expenses of interest would not be there also. In case of AB plc, it has been found that currently the comapny has raised the funds from equity only. The decision of principally financed by the equity is the best option for the company as the risk level of the company would be lesser and the funds could also be raised by the company easily (Hansen, Mowen and Guan, 2007). Further, this option is also good for the company as the debt obligation of the company would be lesser and the net profit of the company would be higher. AB plc could concern about this financing option to raise and manage the funds for the acquirement of an unlisted company and pay to its shareholders. 2.Debenture Financing:Debenture financing is the procedure of raising the funds through issuing the debentures in the market. This financing essentially express that the funds are borrowed by the company to raise the funds for the betterment of the business. Equity financing spans various activities in scope and scale from a few amounts which has been raised by the company from various other sources. Basically, public and listed companies as well as private companies use this source to raise the funds from the market (Hansen, Mowen and Madison, 2010). It is quite different from equity financing where the funds are raised by the company through selling the ownership. Debenture financing is bit costly but the most used source. In this the companies come up in the market with debts and sale out its debts in the market and through collecting the
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