Corporate Finance Foster Brewing Company

Case 42

Submitted To: Sir Shujahat Hashmi Submitted By: Muhammad Rafeeq MBE 103042

Zeeshan Khan


Program MBE

Dated: 30-05-2012

Mohammad Ali Jinnah University, Islamabad

Foster Brewing Company should make a strong marketing plan. Lack of a Financial Plan Unless a firm has a projected financial plan for income and expenses against which actual performance may be measured. day-to-day administration and appraisal of results. So.What areas of operations would you recommend be changed to improve the profitability and financial performance of the firm? Foster Brewing Company should follow that step to improve the profitability and financial performance: Poor Firm Management: Foster Brewing Company lacks a management system that provides for long-range planning. A well-administered firm requires mechanisms for overseeing the firm's finances and operation and for on-going communication among firm members. Lack of a Marketing Map As firm grows. Every stakeholder has interest in the liquidity position of a company. the firm will have little opportunity to identify and correct economic problems. the ad hoc marketing strategies and efforts which may work for a smaller firm become less effective. Employees should also be concerned about the company’s liquidity to know whether the company can meet its employee related . A basic financial plan that includes income and expense projections based on the firm's past experience will enable attorneys to prepare for unusual contingencies and avoid financial surprises. Liquidity Ratios Profitability ratios also play an important role in the financial positions of enterprises. Suppliers of goods will check the liquidity of the company before selling goods on credit.

It can be difficult for a small business that does not want to risk losing business to place a more forceful hand on a regular customer and feel they cannot spare their time from the main focus of the business so outsourcing this system is ideal. Start running credit checks and develop an age debtor system They say the best cure is prevention. Frighteningly. many businesses are unaware of their true financial position as they do not take into account their current and future cash position. Being able to identify ways you can manage costs and improve your cash flow is crucial. Liquidity and profitability are closely related because one increases the other decreases. etc. will be able to advise you on how to better manage your cash flow. So if you do not have one.obligations–salary. a company needs to maintain adequate liquidity so that liquidity greatly affects profits of which some portion that will be divided to shareholders. It is essential that businesses of all sizes have a ‘financial cornerstone’ to advise in their business. Many businesses often tend to deviate from the plan and fail as a result as of the lack of preparation. . when it comes to customers that will not pay on time. Following Are the Steps to Improve the Financial Position Analysis Your Business Plan Every business must have a business plan. for example a professional bookkeeper. Thus. provident fund. pension. £18. Firstly 54% of businesses have no formal business plan. Take the time to look at how you can better manage your cash flow Everyone knows that cash is king! The biggest key to the success of any business is to ensure your cash is managed well. Your plan should be guiding the path that your growing business takes to ensure mistakes are minimized. this cannot be truer. get a business plan. You should have regular management accounts to ensure you are meeting or exceeding your targets.6 billion is owed to small businesses by unreliable customers and a great proportion of these could be avoided with an effective credit control system in place.

allows the business owner to be fully equipped to make sensible decisions to guide them away from any foreseen difficulties and promote a healthy cash flow. A qualified and experienced bookkeeper will take away the burden of the paperwork to help business owners apply their time to the more important everyday running of the business.Start assessing your progress on current reports instead of historic end of year accounts Having Management Accounts allows business owners see what direction their business is heading in now instead of seeing the damaging effects of something that happened 18 months ago in an end of year report when they are then unable to do anything about it.50 10% 20% 23% . In some ways. A qualified bookkeeper will be able to supply you with this financial assistance. Dismiss the myth that any business is ‘too small’ for a professional financial help or does not need it As long as your business has incoming and outgoings. allowing them to make the investments they need to grow larger or save them from failing. Question # 2 Pro-Forma Statements Followings are the assumption while preparing pro-forma income statement and balance sheet for next five years: Sales Growth CGS Operating Expenses Tax Current Ratio Depreciation Dividend Plant & Machinery of Sales 10% 70% 15% 35% 1. you will need a professional. smaller businesses need this help even more as their small cash flow could be better utilized or even increase by a trustworthy bookkeeper. Having the benefit of seeing what is happening to their finances on a regular basis.

The cost of a lease may be slightly higher than bank financing but the cost of the down payment you did not have to make is likely to be less painful than the dilution you suffer from giving away equity. which is generally tougher to finance. Profit re-invested as retained earnings is profit that could have been paid as a dividend. Warning: Don't put so much money down that you end up spending the same amount of cash as you would have had you bought the asset with a down payment. Retained Earnings For any company. They don't tend to make you pledge your house. the amount of earnings retained within the business has a direct impact on the amount of dividends. and they might even agree to sell their interest in your company back to you for a nominal return. in accordance with changes in market rates of interest. Smart Leases Leasing fixed assets conserves cash for working capital (to cover inventory).Loan from Familly Interest Free loan Question#3 what other sources of financing could the firm rely on for reserve borrowing capacity? Followings are the source of financing which that company can use: Friends and Family Members If you're lucky. friends and family members might be the most lenient investors of the bunch. Already this company get loan from family and now bank refuse to give more loan. They may be attractive to both lenders and borrowers when interest rates are volatile. Floating Rate of Interest while issuing Debentures These are debentures for which the coupon rate of interest can be changed by the issuer. . In pro-forma statements we assume that now company not announce dividend until make some high profits and compensate previous losses. Company has opportunity to get interest free loan from family members and make progress in his business. especially for an unproven business.

If you are paying a heap in taxes. the Internal Revenue Service does not lend money. But it does allow you to deduct expenses. evaluate whether you can use your profits to expand your business--and reduce your tax bill. Advances also demonstrate a level of commitment by that customer to your operation.Customers Advance payments from customers--assuming the terms aren't too onerous--can give you the cash you need. . Internal Revenue Service No. to keep your business growing. at a relatively low cost.

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