Financial Engineering Report: BDS Market Growth and Financing

This report provides a comprehensive analysis of the financial engineering considerations for BDS Market's expansion. It examines the potential of organic growth as the primary expansion strategy, highlighting the benefits of leveraging market loans and penetration pricing to increase market share. The report includes a detailed assessment of BDS Market's financial capacity to manage debt, analyzing its ability to service interest payments based on historical and projected financial data. Furthermore, it evaluates the projected increase in sales and net profit, advocating for strategic investments in business operations. The report suggests that BDS Market should consider taking loans from banks or financial institutions, considering its strong financial standing and ability to meet its financial obligations, supporting future growth and market penetration. References to relevant academic research are included to support the analysis.

Running head: INGÉNIERIE FINANCIÈRE/FINANCIAL ENGINEERING
Ingénierie Financière/Financial Engineering
Name of the Student:
Name of the University:
Authors Note:

1INGÉNIERIE FINANCIÈRE/FINANCIAL ENGINEERING
Contents
Answer 1:.........................................................................................................................................2
Answer 2:.........................................................................................................................................2
Answer 3:.........................................................................................................................................3
References:......................................................................................................................................5

2INGÉNIERIE FINANCIÈRE/FINANCIAL ENGINEERING
Answer 1:
Considering that the objective of BDS Group is to achieve rapid expansion thus, organic growth
is the best suitable strategy for the group. Expansion is always the way forward for a business
organization and organic growth is the best method to achieve expansion in the future. The
narrow concept on which BDSMarket is built can be expanded significantly by organic growth.
The necessary resources required for organic growth can be availed from market by taking loans
from banks and financial institutions at affordable rate of interest (Staykova & Damsgaard,
2015).
In addition to using organic growth BDSMarket should aggressively promote its products to
attract the attention of the customers. Also in order to increase sales revenue BDS should
consider penetration pricing strategy to penetrate new markets after expansion (Piekkari, Welch
& Welch, 2014).
Answer 2:
Before discussing about the options available to finance the growth of BSDMarket analysing the
ability of the organization to pay its interest on debt is very important. The following table shows
the ability of the organization to pay interest on loan.
2014 2015 2016 2017 2018 2019 2020
(A):
Interest paid
@3%
136
,080
1
31,998
1
39,210
1
46,170
1
49,094
1
50,585
1
46,067
Net profit 2,698, 1,8 2,7 2,8 3,0 3,0 3,3

3INGÉNIERIE FINANCIÈRE/FINANCIAL ENGINEERING
after tax 920 15,752 60,995 99,045 94,061 27,706 50,053
(B): Net
profit plus
interest
2,835,
000
1,9
47,750
2,9
00,205
3,0
45,215
3,2
43,155
3,1
78,291
3,4
96,120
Interest
times (B/A)
2
0.83 14.76 20.83 20.83 21.75 21.11 23.94
As can be seen from the above that BDS has significant ability to pay the interest amount due on
borrowed funds. Hence, apart from internal sources the funds necessary to finance the organic
growth can be arranged by taking a loan from bank or financial institutions (Haynes & Grensing,
2018).
Answer 3:
As per the information provided in the document it is expected that the sales and net profit of
BSDMarket will increase with every successive year. As per the forecast the sales will reach
$25,879,187 in the year 2020 as compared to the sales of $21,000,000 in the year 2014 and the
sales of $19,530,000 in 2015. Considering that the expected sales will increase with passage of
each year the management should invest necessary funds to expand business operations in the
future. The strategy to pursue organic growth has been chosen assuming that the organization has
the ability to differentiate its products and achieve sustainable growth in the future
(Kowalkowski, Windahl, Kindström & Gebauer, 2015).

4INGÉNIERIE FINANCIÈRE/FINANCIAL ENGINEERING
Penetration pricing of products would further help BSD to increase its market share by attracting
number of customers to the products and services offered by BDS. It is assumed that the
organization does not have necessary resources and retained earnings at present to finance the
organic growth all by itself hence, necessary amount of loans shall be taken from banks or
financial institutions to expand the business operations (Haynes & Grensing, 2016). Also the
decision to use borrowed funds to finance organic growth in the future has been taken after
considering the ability of the organization pay interests on existing debts. The net profit plus
interest expenses of BSD market is most of the times higher than 20 times hence, taking
necessary loans to finance the expansion would be best possible alternative for BSD to expand
its operations (de Mello, Ghauri, Mayrhofer & Meschi, 2015).

5INGÉNIERIE FINANCIÈRE/FINANCIAL ENGINEERING
References:
de Mello, R. B., Ghauri, P. N., Mayrhofer, U., & Meschi, P. X. (2015). Theoretical and
empirical implications for research on South-South and South-North expansion
strategies. M@ n@ gement, 18(1), 1-7.
Haynes, M., & Grensing, G. (2018). Battle Lake Business Retention and Expansion
Strategies Program Summary Report 2018.
Haynes, M., & Grensing, G. (2016). Pelican Rapids Business Retention and Expansion
Strategies Program.
Kowalkowski, C., Windahl, C., Kindström, D., & Gebauer, H. (2015). What service
transition? Rethinking established assumptions about manufacturers' service-led
growth strategies. Industrial Marketing Management, 45, 59-69.
Piekkari, R., Welch, D., & Welch, L. S. (2014). Language in international business: The
multilingual reality of global business expansion. Edward Elgar Publishing.
Staykova, K. S., & Damsgaard, J. (2015). The race to dominate the mobile payments
platform: Entry and expansion strategies. Electronic Commerce Research and
Applications, 14(5), 319-330.