Managing Financial Resources and Decisions

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Executive summary
This report is to propose an appropriate capital structure for Xpresso Delight Limted’s business expansion with the minimum amount of capital as US$ 30 million. In order to achieve that goal, firstly, it is going to identify the sources of finance available for the business as debt financing which include loans, debentures and bonds; and equity financing, which includes common shares, preference shares and retained profit. It is also to discuss advantages & disadvantages of each source, as well as to assess the implications of these different sources related to risk, legal, financial and dilution of control and bankruptcy. Based on those analyses, it is to select the appropriate sources of finance for the project including retained profit, common and preference shares and loans. What’s more, the costs involved with each source will be assessed and compared in order to form the best alternative of capital structure. There are three options of capital structure proposed: • 50% debt financing; and 50% equity including 80% common share and 20% preference shares • 25% debt financing; and 75% equity financing including 80% common shares and 20% preference shares • 10% debt financing; and 90% equity financing including 80% common shares and 20% preference shares Besides, this report is also to mention and explain the importance of financial planning for Xpresso Limited.

CONTENTS Page 1. Cover Sheet ………………………………………………………………….…….…...1 2. Executive Summary ……………………………………………………………………4 3. Introduction…………………………………...…………………………………….…..7 4. Main Body…………………………………...…………………………………….…...8 4.1 Available various sources of finance…………………………………..………......8

4.1.1. Debt financing……………………………………………………………....8
4.1.1.1. Loans………………………………………………………………..…8
4.1.1.2. Debentures………………………………………………………….…8
4.1.1.3. Bonds……………………………………………………………….....9
4.1.2. Equity financing……………………………………………………….…....9
4.1.2.1. Issued share capital……………………………………………………9
4.1.2.2. Retained profit & other reserves……………………………………..10 4.2. Assessment of the implications of sources………………………………………10
4.2.1. Debt financing………………………………………………………….….10
4.2.1.1. Debentures…………………………………………………………...11
4.2.1.2. Bonds…………………………………………………………...........12
4.2.2. Equity financing…………………………………………………….……..12
4.2.2.1. Issued shares…………………………………………………………12
4.2.2.1.1. Common shares…………………………………….………….12
4.2.2.1.2. Preference shares……………………………………………...13
4.2.2.2. Retained profit………………………………………………….……13

4.3. Selection of appropriate sources & The assessment and comparison for costs....14 4.3.1. Appropriate sources of finance……………………………………...……14 4.3.2. Costs of sources……………………………………..……………….……14

4.3.2.1. Retained profit… …………………………………..………………….14

4.3.2.2. Issued shares…………………………………..………………….……14

4.3.2.3. Loans…………………………………..………………….…….….......15

4.3.3. Options of capital structure………………………………………………..15

4.3.3.1. First structure………………………………..………….…………....15

4.3.3.2. Second structure………………………………..…….….…………..16

4.3.3.3. Third structure………………………………..……….…..…………16

4.4. The financial planning …………………………………………..………………17

4.4.1. Definition…………………………………………..……………….…………17

4.4.2. Importance for Xpresso Limited…………………………………..…………..17

4.4.3. Shortage & surplus of capital: …………………………………………….17

5. Conclusion .………………………………………………….……………….……….19

6. Appendix ……………………………………………………………………………..20

7. References…………………………………………………….………………………21

3. INTRODUCTION:
Xpresso Delight Limited is a publicly listed company in Australia Stock Exchange with the headquarter is based in Hanoi, Vietnam. Xpresso Delight Limited is...
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