Shakleton Enterprises LTD Essay Example
Shakleton Enterprises LTD Essay Example

Shakleton Enterprises LTD Essay Example

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The main goal of this organization is to continually evaluate and assess all expenditures. This is done to maintain the quality of the distributed goods while minimizing costs for the company. By review of the interim cash flow forecast for the BEANY PANDA Venture Project, it has been determined that a cost-effective approach is necessary to maintain a positive cash flow.

Presented here is a series of suggestions for the implementation of cost-effective measures. Additionally, this concise report provides fundamental explanations of potential funding sources that can be utilized to finance select recommendations mentioned in this document. Moreover, the appropriateness of the financial resources to the project requirements will be examined. Among these recommendations, it is recommended that sales should decrease their credit period limit from 60-to-30 days.


2- In preparation for increased Christmas sales, stock (UNITS) purchases are expected to increase by 2/3 to 30,000. By implementing a LIFO method for stock rotation, the 20,000 units in storage can be utilized, resulting in a savings of �20,000.
3- To provide vehicles for sales representatives and deliveries, three vehicles (1 lorry, 1 Transit van, and 1 motor car) will be leased from a leasing firm for one-third of the initial cost of purchasing a delivery van and a car for a total of 32,000. Additionally, one Transit van will be purchased through hire purchase and become a company asset after full payment within 18-20 months at market price.
4- The purchase of a warehouse is also being considered when taking all factors into account.

This action needs to be done in September so that any left unsold goods can be stored during the first month of delivery

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Additionally, insurance, road tax, and other expenses will be charged on one transit vehicle owned by the business. This will continue for 18 months after September's final payment. An evaluation should be conducted on potential funding sources to assess their suitability for the business's requirements. Despite the project's potential profitability, sufficient working capital is still necessary to ensure liquidity for paying suppliers and employees on a daily basis. Currently, we have a credit policy that permits customers to pay on credit for up to 60 days while transforming them into trade-debtors once they have sold their items.

Investing in a debtor may involve trading securities, as they may owe money that can be readily traded. Factoring can be used to finance a business's trade debt in two ways. One way is through invoice factoring, which has several advantages such as immediate advance of up to 80% of the outstanding invoice value, debt collection by the factor, payment of the remaining 20% balance by the factor as monies are received from customers (minus a charge), and the potential for bad debt coverage under 'non-recourse' agreements offered by some factors.

Invoice discounting provides the advantage of receiving advance cash against trade debtors, but the disadvantage is that the business must maintain responsibility for debt collection. This option is typically only available to larger, low-risk businesses. However, the factor loses control over direct receipt of payments from the business's customers. Factoring may be suitable for fast-growing businesses as the level of finance provided can increase in line with sales growth. Although simple to understand, factoring may be an expensive alternative and should be avoided by Shackleton Enterprises Ltd to prevent

bad debts and potential late payments.

It is important for the company to avoid the need for debt collection and this can be achieved through prudence. This could involve implementing a set of criteria for new customers seeking credit purchases.

One way to minimize risks and decrease trade debtors in granting credit is through background checks or credit transaction history checks. This method also helps increase cash sales and generate more capital back into the business. Additionally, an overdraft can assist with payment to suppliers and running costs.

An overdraft facility provides businesses with versatility and serves as a safeguard during sluggish sales periods, aiding in their recovery. The interest rate is calculated based on the loan's amount and duration. Nevertheless, there are drawbacks to consider such as the chance of the bank demanding security from the company before extending an overdraft facility, increased interest rates when borrowing larger sums of money, and additional bank fees if the limit is surpassed without informing the bank manager beforehand.

Overdraft is repayable on demand. Another financing option is a mortgage for the purchase of a warehouse, which has advantages of being secured on land and buildings. It can be used to finance the purchase of the property or to provide security for a loan used for another purpose. A commercial mortgage's relatively high values for a single transaction can make it an attractive component for a diversified investment portfolio. However, it is a long-term financing arrangement with typical terms of 10-30 years. In addition to clearing banks, insurance companies and pension funds are also interested in this type of arrangement.

A long term loan can help with planned mortgage repayments.

The advantages are that the loan is typically for a fixed period, and the cost is distributed evenly over time, making it more manageable. However, the downside is that collateral security is often necessary for companies to qualify.

The owner's assets are at risk with long-term loans as the interest rate is fixed to the initial amount borrowed. Failure to maintain payments could result in the loss of assets. However, hire purchase for one vehicle can provide the advantage of using an asset without needing immediate payment.

At the end of the hire purchase (HP) agreement, the business will own the vehicle. However, during the term of the agreement, ownership remains with the finance house and specific terms and conditions must be followed. In case of a default, the finance house can place a charge on the financed asset. On the other hand, with operating leasing, the lessor takes care of maintenance and assets can be easily replaced if damaged at their cost. Additionally, operating leasing is convenient and provides very reliable assets with low risk of breakdown.

Vehicles can be purchased from the lessor at market price, with less tax duty required for ownership. However, there are certain disadvantages to consider. Firstly, the lessee does not own the asset after completing all payments over a long period of time. Secondly, there are restrictions on modifying the asset to maintain the resale value for the lessor. Thirdly, any alteration to the standard specification of the asset could potentially impair its value as it serves as security for outstanding finance. Additionally, in case of default, the agreement places a charge over the financed asset. HP and

leasing are two sources of finance that are provided by finance houses, which are usually subsidiaries of clearing banks or equipment suppliers.

Companies like Lombard Tricity Ltd and Ford Motor Credit Co Ltd can receive financing agreements from Source.1A if they have a track record of making payments on previous arrangements and the capacity to repay the loan.

Debentures provide numerous benefits, such as the ability to issue them for borrowing money, offering a long-term loan that is tradable on the stock exchange. Furthermore, interest payments are considered an expense that can be deducted from the company's profits. Nonetheless, debenture holders are seen as creditors rather than shareholders, and their value often falls below face value.

Debentures can be issued by publicly traded large corporations to raise funds, offering a 10% interest rate that is equivalent to 1.25% or 10/8.

Debentures, which offer a fixed interest rate and long-term repayment terms, are issued by companies as a type of loan to investors. These securities can be traded on the stock exchange but holders are classified as creditors rather than shareholders. Interest payments made by the company to debenture holders are considered expenses that offset profits. Although they carry less risk than shares, changes in interest rates may still cause fluctuations in their market value.

At an interest rate of 8%, a debenture with a 10% yield is worth 1.25% of its face value. However, if the interest rate increases to 15%, the same debenture is only worth 0.66% of its face value. This demonstrates that as interest rates go up, the value of the loan decreases and vice versa.

Please consider AIM Alternative Investment7.

The payment of 40,000 units of stock

can be done through share capital. Those who back us will receive dividends in small amounts. With the initial start-up capital of $50,000, we can float our shares on the exchange and enjoy several advantages such as increased prestige from prior dealings in France, ability to raise funds for expansion, easier borrowing, more salable shares with easy determination of monetary value and lower borrowing costs. Additionally, issuing shares allows us to acquire other companies and enhance our status. However, outside shareholders come with disadvantages including market pressure to perform well and potential takeover if the company owns over 51% of shares.

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