Best method of finance
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Identify in each of the FOUR situations given below, the best method of finance.
Situation one:
Alpha Waffles need to expand and increase their market share by 40% in the next 2 years. They would need to improve their packaging and spend money on advertising. We know that the current interest rate is 15% and banks are reluctant to lend businesses money.
Situation two:
Richardson Ltd is a small building company. Simon Richardson, the owner of the business has to pay his staff £13,000 for their wages. He does not have the money now, however, one of his existing customers promised to pay him by the end of the week.
Situation three:
Barnes Shipbuilding needs to buy new equipment that will cost £345,000. They have £500,000 retained profit from last year but also need to invest in a new project in the far East.
Situation four:
Woods Plc are considering the launch of a new product. The cost of developing this product is estimated around £760,000. The business shares are doing very well in the stock exchanges as the value gone up by more than 50% over the past 18 months.
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Solution Summary
The solution helps to identify in each of the FOUR situations given below, the best method of financing.
Solution Preview
Possible methods of finance:
1 Government grants
2 Selling existing assets
3 Borrowing from Financial Institutions
4 Selling shares
5 Lease
6 Retained Earnings
7 Selling shares
8 Bank Overdraft.
9 Mortgage
Situation ...
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