NAME OF STUDENT Nguyn Hng Chin

REGISTRATION NO 10120115
UNIT TITLE Unit 2: Managing Financial Resources and ecisions
ASSIGNMENT TITLE !ndi"idual #ssign$ent 1: Archies Company
ASSIGNMENT # 1 o% &
NAME OF ASSESSOR Marcus 'ang and Nguyen Huu Chi
Due a!e "# am Oc! $%& $#"'
!( )))))))))))))))))))))))))) here*y con%ir$ that this assign$ent is $y o+n +or, and not
co-ied or -lagiari.ed %ro$ any source/ ! ha"e re%erenced the sources %ro$ +hich in%or$ation is
o*tained %ro$ $e %or this assign$ent/
________________________________ ______________________
0ignature ate
((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((
FOR OFFICIAL USE
1
NATIONAL ECONOMICS UNIVERSITY
BTEC HND IN BUSINESS
Assi)nmen! Co*er Shee!
ASSIGNMENT GRADE

Unit Outcomes
Ou!come
E*ience +or
!he
cri!eri
a
Fee,ac- Assessors
ecision
In!erna.
/eri+ica!ion
Explore the
sources of
finance
available to
a business
(Unit 2, 1
I!enti"# the
sour$es o"
"inan$e
available to a
business
a
Assess the
i%pli$ations
o" the
!i""erent
sour$es
,
Sele$t
appropriate
sour$es o"
"inan$e "or a
business
pro&e$t
c
Anal#se the
i%pli$ations
o" finance as
a resource
'ithin a
business
(Unit 2, 2
Assess an!
$o%pare the
$osts o"
!i""erent
sour$es o"
"inan$e
a
Explain the
i%portan$e o"
"inan$ial
plannin(
,
Assess the
in"or%ation
nee!s o"
!i""erent
!e$ision
%a)ers
c
2
Ou!come
E*ience +or
!he
cri!eri
a
Fee,ac- Assessors
ecision
In!erna.
/eri+ica!ion
Explain the
i%pa$t o"
"inan$e on
the "inan$ial
state%ents

Meri! )raes a0are M" M$ M'

Dis!inc!ion )raes a0are D" D$ D'
1ro+essors ai!iona. +ee,ac- an commen!s
#ssign$ent
1 2 3ell4structured
Re%erence is done -ro-erly 5 should *e done 1i% any2
6"erall( you7"e
Areas +or impro*emen!2
ASSESSOR SIGNATURE DATE 3 3
NAME2/////////////////////////////////////////////////////////////////////////////////////////
4Ora. +ee,ac- 0as a.so pro*ie5
STUDENT SIGNATURE DATE 3 3
NAME 2////////////////////////////////////////////////////////////////////////////////////////
*
FOR I+,ER+AL USE O+L-
89R!F!9 :90 N6
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.
Table of Contents
+A,IO+AL ECO+O/ICS U+I0ERSI,-11111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111
2,EC 3+4 I+ 2USI+ESS 11111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111
Evi!en$e "or the $riteria11111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111112
,able o" Contents11111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111115
Assi(n%ent11111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111116
I1Intro!u$tion11111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111116
II1Assu%ption pro&e$t business7111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111118
III1/a&or Fin!in(11111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111119
11,as)17 111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111119
21,as) 2711111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111
*1,as) *711111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111112
.1,as) .711111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111115
CO+CLU,IO+111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111118
REFERE+CES1111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111119
5
Assinment
I1 Intro!u$tion
Ar$hie An!re' is a %an 'ho has been 'or)in( in the ele$troni$ in!ustr# "or 15 #ears1
+o', he 'ant to have o'ner $o%pan# an! "in! "our investor 'ill (o into business 'ith hi%1
,he %ain pro!u$t o" his $o%pan# are ele$troni$ pro!u$t1
About the $apital, Ar$hie has :5;;;;, ea$h o" the investors has :125;;; an! the# 'ill
put into $o%pan#<s assets, in $o%pan#, throu(h a(ree%ent o" "our investor, Ar$hie 'ill run
the $o%pan#
2e$ause ,he Ar$hie<s $o%pan# 'ill re=uire a total o" :15;;;;; o" "inan$in( to invest
an! star up $o%pan#, Ar$hie plans to borro'in( %ore %one# "ro% other sour$es or sell their
shares, bon!s1 Firstl#, he i!enti"ies the "ollo'in( assets he 'ill nee! to $on!u$t his
operations7
0ehi$le7 :5;;;;
E=uip%ent7 :685;;;
Further%ore, he 'ant to rent o""i$e spa$e, "a$tor# spa$e, $o%puter %a$hines, labour,
ra' %aterial, et$1 So Ar$hie nee! the possible strate(# an! anal#sis $lear 'or)in( $apital,
balan$e sheet, et$1 to $hoose suitable plan "or $o%pan#1
6
II1 Assu%ption pro&e$t business7
Assu%ption Ar$hie is a ne' $o%pan#, an! 'as set up in U>
U><s (eneral situation an! the in!ustr#
,he U> is a lea!er in po'er an! tra!e "inan$e1
Cit# o" Lon!on is one o" the lea!in( "inan$ial
%ar)et in the 'orl!1
?Countr! an" ca#ita$%
En(lan!7 Lon!on
@$At?len 7E!inbur(h
Si!e UBn 7Car!i""
South Ai?len72el"ast
&Lanuaes7 En(lish an! UE+
?Reion% Christian
?Go'ernment an" Monarc(!% Constitutional
%onar$h#
?Currenc!% Coun!
(UK is at the forefront in conducting privatization of State enterprises, focused on
investing abroad. This country has built a capitalist economy with strong industry, excellent
services.)

8
= =
Materials 25> o% =2(500(000 ?25(000
'a*our 20> o% =2(500(000 500(000
8aria*le
o"erheads
10> o% =2(500(000 250(000
Fi@ed o*erheads 20> o% =2(500(000 500(000
0elling and
distri*ution
5> o% =2(500(000 125(000
Raw materials &512 o% =?25(000 15?(250
Materials 150>
co$-lete2
1512 o% =?25(000 52(0A&
'a*our 150>
co$-lete2
1512 o% =500(000 B1(??C
8aria*le
o"erheads 150>
co$-lete2
1512 o% =250(000 20(A&&
11B(5A&
Materials 1512 o% =?25(000 52(0A&
'a*our 1512 o% =500(000 B1(??C
8aria*le
o"erheads
1512 o% =250(000 20(A&&
11B(5A&
e*tors 2512 o% =2(500(000 B1?(??C
A02(0A&
Materials 1/5512 o% =?25(000 CA(125
'a*our 4 50 +ee,s 1550 o% =500(000 10(000
8aria*le
o"erheads
1512 o% =250(000 20(A&&
Fi@ed o"erheads 1512 o% =500(000 B1(??C
0elling and
distri*ution
0/5512 o% =125(000 5(20A
155(A&&
3or,ing ca-ital
reDuire$ent
=1A02(0A& 4 155(AA&2 ?B?(250
5.Credis is taken as
2. Raw materials are in stock for 3 months
The cos!s incurre in a year
4.Finished goods represent one month of production
3.Work in progess inventory is 2 months worth of !2 produced goods
. "entoers take 2 months #efore payment
III1 /a&or Fin!in(
. $ask%
A) Ca$cu$ate t(e *or+in ca#ita$ re,uirements for -./0 for Arc(ie1s com#an! an"
e2#$ain t(e im#ortance of financia$ #$annin to Arc(ie an" (is in'estors)
9
The importance of financial planning
to !rchie and his investors"
DFinan$e is %one#, or, in broa!er ter%s,
it is a %onetar# arran(e%ent %a!e in
ex$han(e "or the abilit# to !o so%ethin(1
,he basi$ sour$es o" %one# are save!,
borro'in(s, (rants an! earnin(1E (Course
boo), 2;1*, p251 So, Finan$ial Clannin( is
a $ontinuous pro$ess to help #ou in %a)in(
sensible !e$isions about #our %one# that
$an help #ou a$hieve #our (oals in li"e1 2ut
the =uestion is DFh# "inan$ial plannin( is
i%portantE1 ,here are three reasons1
? #anage your income and capital or
cash management1 /an# businesses or
or(aniGations have %onthl# $han(in( in
revenues, the# have perio! $ash is plenti"ul,
have perio! $ash is shorta(es1 2uil!in( the
"inan$ial plannin( help the top to $ontrol
%ore easil#, in$o%e expen!iture bu!(etin(
'ill sho' the best 'a# possible in %ana(in(
in$o%e1 ,hus, %ana(e%ent o" in$o%e or
"inan$ial plannin( is ne$essar# in in$reasin(
$ash "lo'1
? $osts priority" ,he "inan$ial plannin(
pro$ess helps a $o%pan# $an be i!enti"# the
%ost i%portant expen!itures, that brin(
about i%%e!iate i%prove%ents in
pro!u$tivit#, e""i$ien$#1 Sin$e, "inan$ial
plannin( $an help in appre$iatin( the best
invest%ent opportunities "or $o%panies
? !ssess the level of ris% in the
investment" Ever#
business 'ants to rea$h
the lon(?run invest%ent1
,hus, "inan$ial plannin(
helps the% to assess an!
avoi! the ris) in the
invest%ent
B) Arc(ie (as (ear" of 3IT an" EO45
6ut "oes not un"erstan" t(e "ifference
6et*een t(e t*o) E2#$ain t(e "ifference to
(im an" articu$ate t(e un"er$!in
assum#tions of eac( a##roac()
Hoo! inventor# %ana(e%ent is )e# to a
$o%pan#<s a$hievin( its (oal o" %eetin(
$usto%er !e%an!s an! havin( hi(h
pro"itabilit#1 ,here are t'o 'a#s o"
%ana(in( inventor#, EOI an! JI,1
? Strate(# &ust'nTime (&'T) is a $on$ept
in %o!ern %anu"a$turin(1 ,he brie"
su%%ar# is7 KRi(ht pro!u$t ? 'ith the ri(ht
a%ount ? in the ri(ht pla$e ? at the ri(ht ti%e
ne$essar#1K In other 'or!s, the JI, is a
pro!u$tion s#ste% in 'hi$h the "lo' o" ra'
%aterials, (oo!s an! pro!u$ts $ir$ulatin( in
the pro!u$tion an! !istribution plannin( in
!etail step b# step, so that the next "ollo'in(
$an be !one as soon as the pro$ess is
ter%inate!1 ,hereb#, there are no ite%s in
the %anu"a$turin( pro$ess in or!er not to
"all into the state, pen!in(, no labour or
e=uip%ent that has to 'ait "or input
operation1
,he JI, s#ste% allo's the s#ste% to
operate %ost e""e$tivel#, avoi!in(
unne$essar# 'aste1
L
? EOI, E$ono%i$ Or!er Iuantit#7 is
one o" the te$hni=ues "or inventor# $ontrol
'hi$h %ini%iGes total hol!in( an! or!erin(
$osts "or this #ear1 E$ono%i$ or!er =uantit#
is the te$hni=ue that solves the proble% o"
%aterials %ana(e%ent1 EOI is essentiall#
an a$$ountin( "or%ula !eter%ine! at 'hi$h
the $o%bination o" or!er $osts an! inventor#
$osts to the least1 ,he result is the %ost $ost
e""e$tive 'a# to or!er =ualit#
2ase! on these prin$iples, $al$ulation
%etho!s 'ill $al$ulate the a!!itional ti%e to
inventor# an! the nu%bers o" a!!in(
pro!u$t a"ter ea$h or!er1 ,he %o!el applie!
in the $ontext o" suppl# an! stable supplies
o" relativel# have (oo! plannin(
JIT EOQ
Just?in?,i%e (JI, is a %ana(e%ent
philosoph# in Japan 'ith the ai% o"
provi!in( "or the ri(ht ti%e, ri(ht pro!u$t
an! a%ount o" shares at the ri(ht ti%e1
E$ono%i$ Or!er Iuantit# (EOI is a %etho!
,hat at pro!u$in( perio! lar(e =uantities o"
%aterials, businesses %aintaine! at the
!esire! level 'ith %ini%al $ost
JI, "o$us on %eetin( the nee!s o" $usto%ers
on ti%e 'ith the ri(ht =ualit# an! =uantit#
'ith %ini%al resour$es, ti%e, an! 'aste
%aterial1
EOI %aintains a "ixe! a%ount o" %aterial in
their inventor# an! have a !e(ree o"
reor(aniGation, in 'hi$h it %ust be a!!e! in
or!er to avoi! shorta(es an! a!!itional $osts
JI, is !epen!ent on the 'or) ethi$ an!
$o%%it%ent o" the entire 'or)"or$e o" the
$o%pan#1
EOI is !epen!ent on "inan$ial an! %ar)etin(
strate(#
Assu%ption "or the JI, %o!el7
? It !epen!s on the )in! o" pro!u$t that a $o%pan# pro!u$e1 JI, 'or)s best in
"oo! (perishable business, "ashion but $an also be applie! in $ars
%anu"a$turin( li)e in ,o#ota1
? 3ave (oo! bu#er?supplier relationships
? 2u#er shoul! near the supplier in lo$ation
? Het e""e$tive $o%%uni$ation bet'een bu#er an! supplier in both 'a#s
? Hoo! !e%an! pre!i$tin( or stable !e%an!1
? Suppliers shoul! be "lexible (i" havin( a $han(in( in !e%an!, suppliers shoul!
be able a!aptation
1;
Assu%ption "or the EOI %o!el
? ,he $ost o" the or!erin( re%ains $onstant1
? 4e%an! is $onstant1 (Course boo), 2;1*
? ,he pro!u$e ti%e is not $han(in( or Gero (Course boo), 2;1*
? Cur$hase $ost per unit are $onstant (i1e1 no bul) !is$ounts (Course boo),
2;1*1
? ,he opti%iGe plan is "i(ure! out "or onl# one pro!u$t1
?,here is no !ela# in the replenish%ent o" the sto$), an! the or!er is !elivere! in
the =uantit# that 'as !e%an!e!1 (i1e1 in 'hole bat$h
2. $ask 2%
On the %ar)et to!a#, in the short
ter%, there are %an# "a$tors a""e$tin(
$usto%er 'hen !e$i!in( to exten! tra!e
$re!it1 Spe$iall#, 'ith Ar$hie? a ne'
$o%pan#, $usto%er 'ants to see %ore an!
%ore in"or%ation li)e appli$ation "or%s,
Cost o" ,ra!e Cre!it ,et$1 O" Ar$hie1
? ,ra!e $re!it is one part o" the pro$ess
to buil! business $re!it1 It is an open
a$$ount 'ith a supplier 'ho lets a $usto%er
bu# no' an! pa# later1 A "or%al $re!it $ar!
%ust be $o%plete 'ith appli$ation7 ,he
le(al na%e o" businesses, le(al o'ner, #ear
in business, in!ustr# SIC $o!e, I4 o"
$o%pan#, nu%ber e%plo#ees, total revenues
per #ear, ban) re"eren$es, an! Si(natures o"
the o'nersMo""i$ers o" the $o%pan#1 ,hen, a
$re!it institution li$ense! 'ill $he$) the
=ualit# o" #our $o%pan#Ns reputation
throu(h pur$hase histor#, ban)in(
in"or%ation, overall "inan$ial health, an!
other !ata1 ,his $he$) 'ill be )ept
$ontinuin( %onthl#1 2esi!es, I" Ar$hie
'ants to be a$$epte! b# the supplier, the#
%ust ensure the $ontra$t 'ith pa# on ti%e
the "ees an! interest1 4i""erent suppliers 'ill
have !i""erent ter%s an! $on!itions "or
$o%pan# Ar$hie 'hen the# pa# tra!e
$re!its1 I" Ar$hie uses suitable tra!e $re!its,
the# $an in$rease both the volu%e o"
suppliers an! Ar$hie<s sales1 3o'ever, in
$ase i" Ar$hie pa#s late "ee an! interest,
suppliers 'ill have %ore bene"it in $onta$t
li)e Ar$hie %ust pa# %ore interest than
nor%all#1
,o be exten!e! a short?ter% (1 #ear
or a lon(?ter% (%ore than 1 #ears loan "ro%
the ban), the ban)s 'ill be $he$)e! so%e
in"or%ation "ro% #our $o%pan#1 Appl#in(
Ar$hie, assu%in( Ar$hie 'ants a ban)er
exten! a short?ter% or lon(?ter% loan1 In
!e$i!in( 'hether or not to exten! "or
Ar$hie, ho' lon( to exten!, ho' the interest
rate, ban)s 'ill $onsi!er #our "inan$ial
abilit# (#ou have (roun!s to sho' repa# the
ban) in a ti%el# %anner, 111, ,hrou(h the
$re!it a(ree%ent si(ne!, Ar$hie<s "inan$ial
report, business plan, a""or!abilit#1 2an)ers
$an pre!i$t the Ar$hie<s abilit# "or repa#in(
the "ees an! interests or not1 I" the# see a
suitable situation, Ar$hie $an be exten!e!
loan ban)in(1 It the 'a# the ban) see $on
#our $o%pan# 'hen #ou 'ant to exten!
%ore %one# "ro% the short?ter% or lon(?
ter% loan ban)1 ,o be %ore openin(, be"ore
bein( exten!e!, there are so%e prin$iples o"
len!in( i" a $o%pan# 'ant to borro' %one#
"ro% ban)1 ,he ban) %ust loo) business
11
as)in( "or loan "ro% #ou $o%pan#1 Can the#
be truste!, is #our $o%pan# able to repa#
(i1e1 Dis it a pro"itable one an! are there
enou(h spare pro"its to be able to a""or! the
interest an! the perio!i$ repa#%ent o"
portions o" the loanE O Course boo), 2;1*1
Further%ore, the ban) 'ant to )no' the
purpose o" the loan, repa#%ent ter% o" the
loan are ver# si(ni"i$ant1 Spe$ial, the ban)
'ill nee! so%e "or% o" se$urit# that it $an
turn to i" #our $o%pan# $an not repai! (&ust
li)e a %ort(a(e1
Finan$ial resour$es, abilit# to return
on invest%ent, !ivi!en!s per #ear are
ele%ents to help Ar$hie to attra$t an e=uit#
investor 'hen the# sell shares1 Fhen an
investor bu#s Ar$hie<s shares, the# be$o%e
sharehol!ers1 Sharehol!ers o'n a share o"
the $o%pan# in 'hi$h the# have investe! or
bou(ht shares1 ,his %eans the sharehol!er
$an have a sa# in the runnin( o" Ar$hie<s
a$tivities1 ,he# %a# ta)e part in a )e#
%a)in( !e$ision o" the $o%pan#1 In other
si!e, Ar$hie is an ele$troni$ $o%pan#, so in
the sto$) %ar)et, Ar$hie<s share $an (et hi(h
stabl#, so the sharehol!ers $an return on
their invest%ent =ui$)l# an! (et a hi(h
!ivi!en! per #ear1 A!!in( reasonable
"inan$ial resour$es, abilit# $ontrols the
$apital, assets an! in$o%e, Ar$hie are
per"e$t berth stop "or investor 'hen the# are
!e$i!in( to pur$hase a part o" a sto$) issue
"ro% Ar$hie1
3. $ask 3%
A) Unit -5 /)65 /)c% Ar$hie an! his (roup o" investors are intereste! in raisin( the
a!!itional nee!e! $apital b# issuin( %ore shares o" $o%%on sto$) even if they don)t retain
control of the company
(The issuance of shares of the company and investors !rchie has many advantages. it
helps companies have a large capital to help companies attract and maintain good
staff, have the opportunity to cooperate with high potential companies and more
professional. however The !rchie companies willing to sell *++, of shares can lead
to unpredictable conse-uences. .or example, dispersion of ownership, profit or loss
can be entirely firm. !ll information of the company have been widely publicized and
rigorous.)
Benefit Cost Bur"ens 7ractica$$!
7ri'ate
#$acement
Iui$) an! expense
e""e$tive1
Sharehol!ers are
$hoi$e o" investors1
Flexibilit# in )in! an!
t#pe o" "un!in(1
Easier to ne(otiate on
return1
/one# "or s$rutin#
not too %u$h1
4i""i$ult to "in!
suitable investors1
2e !an(er o"
insu""i$ient in "un!s1
So%e $ase li%ite!
investors1
Co'er 'as !ivi!e!
to %an# part or
po'er o"
sharehol!ers are not
bi(
Lost %one# an! ti%e
to "in! suitable
investors
OTC Shares are sol! 'i!el#
an! publi$l#
La$) o" $o%%ent an!
"ee!ba$) "ro%
Investors easil#
a""e$te! b# s%all
Cra$ti$alit# is not
hi(h, a $o%pan# 'ill
12
Iui$) attra$t investors
an! $apital to expan!
rapi!l#
In short ti%e, Ar$hie
$an be expansion to
bi((er 'ith "ast $apital
e$ono%i$ invest%ent
pro"essionals
+ot $ount overall
"inan$ial an! in so%e
$ase, there are hi(h
ri$)s1
$han(es, an! sol!
his shares
nee! to ta)e ti%e to
be per%itte! "ro%
the $o%petent
authorit#1 2ut i" #ou
'ant =ui$)l#
invest%ent, this is a
(oo! 'a# "or (et "ast
$apital
7u6$ic stoc+
mar+et
,he $apital in$rease is
not li%ite! "ro% the
investor1
Ar$hie<s shares are
post on +-SE, it
in$rease the belie" o"
$usto%er
throu(h "inan$ial
state%ents an!
in"or%ation publi$l#
available on the
%ar)et, Ar$hie
in$rease! sa"et# "or
bu#ers
In$rease spee!
invest%ent an! re!u$e
the ris) o" hi(h
$on$ept o" invest%ent
Eas# to lose $o%pan#
i" appear the investor
bu# all Ar$hie<s
shares
3i(h "ees ta)e part in
an! hi(h taxation1
Ar$hie %ust "ollo'
%an# rules1
,he transa$tion 'ill
ta)e %ore ti%e
4a# b# !a#, Ar$hie
al'a#s proves their
abilit# that the# $an
be (oo! in business
an! sho' their
"inan$ial $apital per
%onth or #ear1
Ar$hie al'a#s be
$are"ull 'ith an#
!e$ision invest%ent
an! %ust (et (reat
satis"a$tion "ro% the
investors
I" Ar$hie 'ant to
"ollo' a lon( ter%
business, this a (oo!
'a# to (et a sa"et#
"un!s1
3o'ever Ar$hie
%ust be a $o%pan#
that ha! a histor#
business in the past,
an! assets %ore an!
%ore than 5;;;;;:
the# have1 So it is
i%possible "or
Ar$hie to appear in
Cubli$ sto$) %ar)et1
B) Unit -5 /)a5 /)c%
Fith one $o%pan# be(in a business li)e Ar$hie, the# shoul! i%prove their
"inan$ial throu(h issuin( bon!1 ,he $o%pan# 'ill be proa$tive an! eas# to $ontrol !ebt an!
plan to $reate a pa#%ent plan1 3o'ever bon! still have $onstraints, raisin( b# usin( bon! are
(oo! an! sa"et# than borro'in( "ro% a len!er1
Benefit Cost Constraints
Bon"s 2on! is relativel# sa"e
be$ause it )in! o"
se$urities "ixe! in$o%e1
Issuan$e $osts an! pa#
lo'er interest rates than
$onventional bon!s as
$o%pare! to the interest
rates an! this %eans
4ue to sharehol!er
parti$ipation in the
%ana(e%ent o" the
$o%pan# shoul! s'it$h
$an $ause a $han(e in
$ontrol o" the $o%pan#1
Fhen bon!s are
$onverte!, the e=uit# is
,#pi$all#, bon!s $an be
sol! at an# ti%e ? this is
one o" the a!vanta(es
$o%pare! to other t#pes o"
bon!s are "ixe! in$o%e
se$urities other'ise1
3o'ever, it is also an
inherent ris) o" pri$e
"lu$tuation1 ,hat is 'hen
1*
re!u$in( the ris) to the
issuer1
In$rease in share $apital in
the "uture to %ove "ro%
bon! !ebt into e=uit#1
Sto$) pri$e !e$lines are not
!ue to avoi! an in$rease in
the nu%ber o" shares on the
%ar)et =ui$)l#1
2e"ore s'it$hin( bon!s
'ill not re!u$e the in$o%e
o" the sharehol!ers "ro%
issuin( shares1
Easier to raise $apital !ue
to the attra$tion o" bein(
able to s'it$h "ro% bon!s
to sto$)s1
K!ilute!K b# the
in$rease! nu%ber o"
shares outstan!in(, ea$h
share 'hen it represents a
lo'er per$enta(e o"
o'nership in the
$o%pan#1
,he results o" $onversion
'ill re!u$e interest $osts,
I,e, in$rease the taxable
in$o%e o" the $o%pan#1
,here"ore, $o%panies
have to pa# %ore taxes
'hen $onvertin(1
the sale o" bon!s b# the en!
o" its ter%, i" the pri$e "alls
at the loss, the investor 'ill
re$eive less than the initial
invest%ent ($apital loss1
Cro"essional stresse! that
onl# invest in bon!s 'hen
#ou have !etaile! a!vi$e,
in$lu!in( invest%ent
ob&e$tives an! ris)
toleran$e o" the $lient has
been thorou(hl# revie'e!1
It is i%portant, investors
%ust o'n an i!le "un!s (not
to be use! !urin( the ter%
o" the bon!s su""i$ient to
provi!e "or the $ase o"
$apital loss !ue to loss o"
bon! pri$es1 Overall the
bi((est $onstraints is /0is%
of price fluctuations1
C) Unit -5 /)a5 /)6%
Fro% intro!u$tion, be(innin( $apital o" Ar$hie is :55;;;;;1 Ar$hie 'ant to raise their
"inan$ial to :15;;;;; b# a!!in( :L5;;;;1 3o'ever Ar$hie 'ant to )eep the $ontrol o" the
$o%pan#1 ,here are t'o 'a# "or Ar$hie no', raisin( $apital b# shares an! borro'in( "ro%
other sour$es1 I" Ar$hie $hoose the 'a# usin( shares, an! still )eep the $ontrol, Ar$hie %ust
have at less 5;P share o" $o%pan# or at less :85;;;;1 ,hen Ar$hie shoul! borro'
(:L5;;;;?:85;;;;Q 8-.....9)
Ta2 Ric+ :inancia$ costs
im#$ications
B! S(ares Cro"its tax "ro% the
"inan$ial shares
approve! an! all
investors are supporte!
b# (overn%ent b#
$oin$i!en$e tax
I" a sharehol!ers or
investors bu# %ore
than 5;P shares o"
$o%pan#, Ar$hie 'ill
be lost $ontrol1 (O,C
o" publi$ sto$)
%ar)et1 I" Ar$hie use
private pla$e%ent, the#
$an $ontrol the a%ount
o" shares
4ivi!en! an! %one#
servi$es "or )eepin( the
investor sta# "or
invest%ent
1.
B! Borro*in Fhen Ar$hie borro'
%one# "ro% ban) or
other sour$es, the
$o%pan# %ust pa# the
tax, an! interest rate
!epen! on ban) loans1
I" the $o%pan# is not
(oo! business, $an<t
repa# !ebt, interest rate
that the $o%pan# 'ill
lose $ontrol or
ban)rupt$#
I" Ar$hie (et pro"it,
the# %ust pa# interest,
so pro"it line 'ill
!e$line1
4. $ask 4%
A) Follo'in( pro"it an! lost state%ent "or Ar$hie<s Co%pan# "or 2;1., 'e $an see there
are t'o evi!en$e to sho' Ar$hie !i! raise their "inan$in(1 ,hat are DInterest Ca#able7 .;;;;:
an! 4ivi!en!s7 22,5;;:E
Assu%ption Ar$hie loan short ter% an! lon( ter%1
? ,hat !ivi!en!s o" *P have been !e$lare! at #ear<s en!, so Ar$hie<s share e=uit# is
22,5;;M*PQ ;<....8
& Initial, Ar$hie has been able to utiliGe 15;;;;: o" tra!e $re!it, Ar$hie<s "inan$ial
re=uire%ent is 15;;;;;:, then borro'in( re=uire%ent is 15;;;;;?85;;;;?15;;;;; Q
=.....8
& 6;;;;;: here are in$lu!e short ter% an! lon( ter% loan1 So i" short ter% is @, lon( ter%
loan 'ill be (6;;;;;?@
? Ar$hie<s interest pa#able is .;;;; 'ith lines o" $re!it an! short ter% loan at .P, lon(
ter% borro'in(s are available "ro% ban) at 9P, 'e have
.P R @ S 9P R (6;;;;;?@Q.;;;;
>?-.....8
Finall#, Ar$hie<s short ter% loan is -.....8 an! lon( ter% loan is 0.....8
B. 'mpact the financial statement"
? Loans o"ten re=uire repa#%ent %onthl# , 'hi$h 'ill i%pa$t #our "inan$ial
state%ents re(ularl#1 Loan pa#%ents stru$ture! in %an# !i""erent 'a#s $an i%pa$t #our
"inan$ial state%ents better in so%e %onths than in others1 So%e loans ((#re loans o""er
re(ular $ash to #our $ash "lo' 'hile other loans !isappear, it 'ill %a)e a $han(in( 'ith
"inan$ial state%ents1
? Shares o""er an $ash "lo', in %an# $ase not re=uire repa#%ent1 Co%%on shares 'ill
i%pa$t #our "inan$ial state%ents less than pre"erre! shares1 besi!es, 'hen a $o%pan# put
shares into %ar)et, $onte%porar# it %a)e raise !ivi!en!s, an! %a)e a $han(in( in a "inan$ial
state%ent
'mpact the value of the company"
15
? I" a $o%pan# are borro'in( %ore an! %ore, tax 'ill be lo', it %a)e in$reasin(
%obilit# o" $apital an! labor , attra$t s)ille! 'or)ers an! %an# !i""erent sour$es1 ,hen pro"it
be"ore tax !e$rease, neither tax repa#%ent1 It %a)e in$rease the value o" a $o%pan#
? Shares7 Fhen a $o%pan# sell put %ore share into %ar)et, abilit# "inan$ial o" a
$o%pan# 'ill in$rease be$ause shares %a)e in$rease $apital1 3o'ever this also %a)e
in$rease tax o" $apital, pro"it a"ter tax 'ill !e$rease, so value o" the $o%pan# 'ill !e$rease1
C) Fith a $orporation , Sharehol!er has the %ost i%portant role "or the $o%pan# , the
role o" Sharehol!er %ore i%portant 1 ,he Sharehol!er 'ho !ire$tl# $ontribute %one# to the
$o%pan# to help $o%panies invest in the pro&e$t 1 Appl# to Ar$hie $o%panies , so%e
sharehol!ers are unhapp# 'ith the interest rate o" !ivi!en!s 1 I" the# "eel that the $o%pan#
pa# the interest rate "or the ban) at . P an! 9 P "or short ter% an! lon( ter% loan 1 In "a$t
the# have onl# re$eive! * P !ivi!en! rate 1 ,he# "eel the %one# the# $an (et to %ore than *
P , the# are a loss 1 3o'ever, i" #ou loo) at the table o" Ar$hie "is$al 2;1. , Revenue 'as :
215 %illion , 'hi$h su((ests the $o%pan# is pro"itable , 'ith revenues o" non?ne(ative , an!
parti$ularl# Retaine! Cro"it "or the #ear o" the $o%pan# is : *98,99; , 'hi$h this $on"ir%s
the $o%pan# is to invest in a parti$ular pro&e$t in the next #ear 1 ,he# sho'e! us a lot o"
%one# to )eep the s$ale o" lar(e pro&e$ts 1 So until next #ear , %a)e sure the $o%pan# 'ill
$ontinue to pro"it , an! * P !ivi!en! that %u$h %ore valuable 'hen $o%pare! 'ith . P an!
9 P ban) interest rates 1 So , a 'or! o" a!vi$e to sharehol!ers an! investors , $ontinue to
invest in $o%panies Ar$hie
16
CONCLUTION
Fith a &oint sto$) $o%pan# an! the ne' $o%pan# as Ar$hie, the e""i$ien$# is
essential1 As a $o%pan# in the "iel! o" ele$tri$it#, Ar$hie nee!s to attra$t %ore an! %ore
investors e""i$ientl#, so $o%panies nee! to have spe$i"i$ business strate(ies, $reation o" trust
'ith $usto%ers an! ne$) their sharehol!ers to $ontinue to sta# investe!1 ,hrou(h the sale o"
sto$)s, bon!s, ban) len!in(, Ar$hie also nee! to $al$ulate to please sharehol!ers, in$reasin(
the interest !ivi!en!s an! retaine! pro"its "or the $o%pan# to $ontinue investin( in next #ear1
,o !o that, Ar$hie shoul! assess the situation throu(h "inan$ial reports, up!ate! "ull
in"or%ation to sharehol!ers, an! the pro%ises %a!e in $on&un$tion 'ith the !evelop%ent
risin( !ivi!en! rate "or sharehol!ers
18
RE:ERENCES
11 Anon1, 2;1*1 To 2xtend Trade $redit or 3ot To 2xtend Trade $redit. TOnlineU
Available at7 http7MMbe"oreitsne's1$o%MbusinessM2;1*M;8Mto?exten!?tra!e?$re!it?or?
not?to?exten!?tra!e?$re!it?25256661ht%l
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21 Anon1, n1!1 ! business community. TOnlineU
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TA$$esse! 2. O$tober 2;1*U1
*1 Anon1, n1!1 4ifference 5etween 267 and &'T. TOnlineU
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&itM
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.1 Anon1, n1!1 2conomic 6rder 7uantity #odel (267). TOnlineU
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51 Anon1, n1!1 2xtending $redit to 8our $ustomers. TOnlineU
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61 Anon1, n1!1 h9 th:ng v;n b<n -uy ph=m ph>p lu?t. TOnlineU
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81 Anon1, n1!1 @ow 0aising $apital 'mpacts 8our .inancial Statements. TOnlineU
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91 Anon1, n1!1 Arivate Alacements. TOnlineU
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19
L1 Anon1, n1!1 T!B $6#A2T'T'63. TOnlineU
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1;1 Anon1, n1!1 The 'mportance 6f .inancial Alanning. TOnlineU
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vie'Q,he_I%portan$e_O"_Finan$ial_Clannin(W%i!Q156*W%i!Q156*
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111 Anon1, n1!1 United Kingdom (UK) C4A Cross 4omestic Aroduct. TOnlineU
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121 Anon1, n1!1 Day 4Ei @=n. TOnlineU
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1*1 Anon1, n1!1 Day 3gFn h=n. TOnlineU
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1.1 Anon1, n1!1 Ghat is .inancial Alanning. TOnlineU
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151 2hatta, A1, n1!1 !ssumption of &'T. TOnlineU
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161 Foun!er, n1!1 $hiHn lIJc &ust'nTime (&'T) lE mKt %h>i ni9m trong s<n xuLt hi9n
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181 3a, +1 ,1, n1!1 Cia h=n %ho<n vay t=i 3gNn hEng !griban%. TOnlineU
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1L1 Crit$har!, J1, n1!1 @ow to Cet Areapproved for a Ooan. TOnlineU
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2;1 0X, 31, n1!1 PQu tI vEo tr>i phiHu" Iu vE nhIJc MiRm. TOnlineU
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211 Faters, S1, n1!1 5uilding 5usiness or Trade $redit. TOnlineU
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221 Anon1, 2;1*1 267 #odel. TArtU1
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2*1 Anon1, 2;1*1 #ap of $D#Ss &'T !rchitecture. TArtU1
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