Survey of Clariton Antique Ltd
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Added on 2020-01-07
Survey of Clariton Antique Ltd
Added on 2020-01-07
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INTRODUCTIONFinancial management playsaverysignificantroleforanybusiness organization in thiscompetitive market for long run of the business. Moreover, firms unit can attain success only whenit has enough amount of fund for the implementation of plan. Thus, it is highly required for themanager to develop highly competent framework which in turn facilitates optimum use of thefinancial resources. The rationales behind this, company can get competitive edger over others onlywhen it introduces the products and services within the suitable time frame. The belowmentionsurveyof Clariton Antique Ltd whoproposes highly distinctive orantique thingstotheirconsumers.. Such firmisestablishedbyfourfriendsofLondonwhosebasicaimistoearnprofitbyopeninganotherfranchisewithmoreprofit. Inthepresentassignmentdiscussionbasedondifferentsourceswhichisusedbypartnershipfirm. Besides this, it will alsodevelop understanding about the significance of capital budgeting tools and financial planning inthe decision making aspects. TASK 11.1 Identifying the sources of financed which is available to business Mentioncitedreport presents that clariton limited needs600000millioneuros for businessexpansionandgrowthoralsoforthefunctions. In this regard, differentmethodsoffinanceforallthecorporationswhetheritisunincorporatedbusinessdiscussedbelow :Unincorporated business Sales of assets: Sole traders and entrepreneurs can raise fund by dealingoftheirvaluableswhich is not usingbythemintheeffectivemanner (Caglayan and Demir, 2014). Everybusiness organization has some assets which have no further use for them. In this regard, byselling such assets on their scrap value business unit can generate fund to the large extent.For instance: By selling unused land or plant at disposable value Clariton Ltd can generatefund.Leasing: Unincorporated business tookthevaluablesonrentforstartinguptheirventures.Furthermore, leasing offers give relief to the entities by using the valuables by paying thelease amount to the owners . Moreover, thefirmsareliabletopaythatamount to theproprietor of assets in return of making use. For instance: Company can establish store buytaking land on lease. Personal savings: Business entity can also start business by taking making use of personal
savings. Moreover, in this, entrepreneur is highly free from the periodical financial burdenin terms of interest etc. Hence, by using such source sole traders can execute their planeffectually. Hire purchase: In order to fulfil the financial needs and requirement sole traders can alsotake resort of the hire purchase source. Moreover, in this, at initial level by making downpayment business unit can take possession of asset (Dalal-Clayton and Sadler, 2014).Further payment is made by the business entity in the form of periodical instalments. It thisway, such source facilitate smooth functioning of the business operations and functions. Forinstance: Clariton Ltd can fulfil its financial need by purchasing equipments on the basis ofhire purchase. Incorporated business Issue of shares: Clariton Ltd can generate fund by issuing shares to the general public atlarge. It is one of the cheaper sources of finance which require high investment only at thetime of launching an IPO. Thereafter, it is highly easy for the firm to invite investors toinvest in the shares of firm. Bank loan: Further, Cl;aiton Ltd can also raise fund by approaching to the financialinstitution. In such source, by fulfilling the legal and documentary formalities business unitcan generate enough amount of fund (Fraser, Bhaumik, and Wright, 2015). In this, businessunit is liabletopaythatmoneyoftheleaselaterthespanoftime. For instance: Businessorganization can obtain fund by presenting suitable financial plan or framework to thecustomers. Venture capitalist: Business entity can also raise fund by approaching to the venturecapitalist. Moreover, they are the onewholiketoentrusttheirmoneyonthoseorganisationswhoaregreatlyspreading. Hence, by taking assistance from capitalist business entity canimplement his idea. For example: There are several venture capitalists such as We FinanceLtd etc that helps company in getting fund to the large extent. Factoring: Clariton Ltd can also generate fund by discounting the bills from financialinstitution. For this facility, banking institution charges some cost in the form of discount. 1.2 Assessing the implication of varied sourcesIdentified sources of finance have following implications on the business entity are as follows: Sales of assets: Clariton Antique Ltd needs to prepare a sale contract to transfer the
ownership of assets. Production might be decline if business sell unwanted or disposable assets. Itmay be possible that Clariton Antique Ltd has to stop delivery of a particular product or service.Disposal of long-term asset may results in massive reduction in manufacturing rate and may resultin declined yield (Götze, Northcott and Schuster, 2015). It is an internal business resourcehenceforth, will not bring any change in business control. None of the information needs to discloseto the outsiders.Bank loan: Collateral security is another implication that business needs to secure lending.Adhering to the debt covenants is also necessary. Interest either fixed or variable is the financialburden of loan. Repayment is spreaded across a given duration of loan. Being a borrower, ClaritonAntique Ltd needs to meet out the terms and conditions of the loan and in case of default, there isalways bankruptcy cost exists (Hubbard and et.al., 2014). It does not lead to bring any change in theownership as lenders or debt holders may not put their restriction over business activities. Leasing: In terms of legal aspectscontract will be made. Leasing charges includes some interestas cost of finance and also provide tax benefits. Hire purchase: Legal contract between vendor and business to agree upon the terms andconditions is required. Sometimes, it may be possible that Clariton Antique Ltd needs to pay highervalue that the original cash cost (Kirkos, Spathis and Manolopoulos, 2007). Repayment in smallinstalment helps to manage cash resources. Interest on instalment provides tax advantage. Vendorshave to right to take back the assets till the finalized payments.Factoring: Legal documents need to be prepared for selling debtors to be factoring agent. Alittle discounting charge will be charged as financial cost. After repayment to debt holders, factoringagent will be paid. 1.3 Evaluating the most appropriate sources of finance for business It is advised to the jointventures by issuingbondsanddebentures for raising the capitalmore effectively and efficiently. The rationale behind this, company does not have to make highlevel of expenses for the issuance of shares. Besides this, usually investors are ready for entrustingtheircapitalonthoseventurewhoaremorespreadingdaybyday. In this way, by declaringbonds
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