Managing Financial Resources and Decisions
The financial difficulties in 1997 make Summer Investment Limited understand the importance of financial management. In view of the global financial fragility, Summer’s board of directors would like to take a review on the financial status of the company. As an independent business consultant, you have to write a formal business report to the Management to address the following issues:
a) Identify the sources of short/medium and long term finances available to Summer now and in near future. You may refer to Appendix I to support your findings, if needed.
b) Assess the legal, financial, control, and bankruptcy implications of the different sources identified at the task above.
c) Analyse the finance costs of the respective sources of finance, as identified at the task above.
ANSWER
To: Board of Directors
Re: Business Report on Summer Investment Limited
Date: 25th January 2012
According to the Group Statement of Comprehensive income for the Year ended 30th June 2011 of Summer Investment Limited (“Summer”), it is noted that the profit before taxation was decreased by over 34%. The finance (expenses) / income were reduced for almost 40% while the net valuation gains on investment properties were dropped over 90%. In view of the global financial fragility, it is very important for the company to select the appropriate source of finance for preventing the financial difficulties situation same as 1997 occurred again, and also for Summer’s business expansion in the future as well.
There are some different ways of finance which are suitable for Summer. Recently, the company can apply overdraft or loan facility from the bank, which is kind of debt finance. Another way is the equity finance; Summer can issue redeemable ten-year debentures for the long-term expansion planning. Besides these, Summer can also well use the existing assets by leasing out the investment properties to increase the capital funding
a) Identify the sources of short/medium and long term finances available to Summer now and in near future. You may refer to Appendix I to support your findings, if needed.
b) Assess the legal, financial, control, and bankruptcy implications of the different sources identified at the task above.
c) Analyse the finance costs of the respective sources of finance, as identified at the task above.
ANSWER
To: Board of Directors
Re: Business Report on Summer Investment Limited
Date: 25th January 2012
According to the Group Statement of Comprehensive income for the Year ended 30th June 2011 of Summer Investment Limited (“Summer”), it is noted that the profit before taxation was decreased by over 34%. The finance (expenses) / income were reduced for almost 40% while the net valuation gains on investment properties were dropped over 90%. In view of the global financial fragility, it is very important for the company to select the appropriate source of finance for preventing the financial difficulties situation same as 1997 occurred again, and also for Summer’s business expansion in the future as well.
There are some different ways of finance which are suitable for Summer. Recently, the company can apply overdraft or loan facility from the bank, which is kind of debt finance. Another way is the equity finance; Summer can issue redeemable ten-year debentures for the long-term expansion planning. Besides these, Summer can also well use the existing assets by leasing out the investment properties to increase the capital funding