CYCLERMATE COMPANY PERFORMANCE REPORT Word count: 3099 words The INCREDIBLES – FB2A Ngo Mai Anh Hoang My Hanh Dinh Ngoc Huyen Nguyen Hai Ly Nguyen Ha Thu Nguyen Son Tung Content 1. Introduction 2. Liquidity and Capital structure 2.2. 2.3. 2.4. 2.5. 3.1. 3.2. SWOT Analysis Liquidity Matters Capital Structure Matters Short-term options Page 3 4 3. Production Methods SWOT Analysis Short-term Options 8 4. Human Relations 5. Investigation for Lone-term Survival and Profitability 6. Conclusion 7. Reference 8. Appendix 10 12 13 14 15 2|Page 1. Introduction Cyclermate Ltd is a small company producing bicycles in UK. The firm was set up by Lewis Llewellyn and Dai Armstrong, the two close friends in a local …show more content…
Generally, Cyclermate’s current liabilities are still in control with the liquidity of its current assets. However, with limited cash in hand, other current assets are needed to increase liquidity in to ensure the ability to pay debts in urgent circumstances. 2.3. Capital Structure Matters Capital structure is the way a company combines between Equity and Liabilities in order to optimize financial sources. The effectiveness of a company’s capital structure is often analyzed through debt-to-equity (D/E) ratio. Here, Cyclermate’s D/E ratio is estimated 1.976. It means that with each £ 1 of Equity, there is £ 1.976 of Liabilities. In other words, at the moment, the ability to pay debt of Cyclermate is over the ability of payment for shareholder’s fund. To resolve the problems or to reduce the ratio, there are two main trends: decrease Liabilities and/or increase Equity. In the short term, it is very difficult to raise shareholder’s fund as it takes time to persuade individuals and organizations to invest in a small company who is in the verge of bankruptcy. Even when there is a possibility that Dai’s cousin will invest to Cyclermate, long time will be needed to complete legal policies and internal matters. Thus, in short-term, it is more rational to focus on minimizing Liabilities. Therefore, problems of capital structure in short-term turns out to be the same matters with liquidity, which is: how to increase cash in company
Our company will plan to finance our strategy principally through issuing stock and cash flows from operating activities generated from the company’s normal business functions. It is undesirable for our strategy to issue debt because we would like to stay away from interest payments. Our company anticipates our debt to equity leverage ratio to be around 0.5.
Finding the perfect capital structure in terms of risk and reward can ensure a company meets shareholder expectations and protects a firm in times of recession. Capital structure refers to how a business puts its money to “work”. The two forms of capital structure are equity capital and debt capital. Both have their benefits and limitations. Striking that perfect balance between the two can mean the difference between thriving versus trying to survive.
This step involves short and long term debt equity analysis. The proportion of equity capital depends on the possessing and additional funds will be raised. The choice of the source of funds the company has are the issue of shares and debentures, loans to be taken from banks and financial institutions and public deposits to be drawn in form of bonds. The choice will depend on relative merits and demerits of each source and period of financing. The management of the investment funds is key in allocating that the funds are going in the correct place. The profits that are made can be down in two ways dividend declaration which includes identifying the rate of dividends and retained profits in which the volume has to be decided which will depend upon expansion and diversification of the company. The management of cash is another important function. Cash is needed for all different aspects of the company such as payment of salaries, overhead and bills. All of these are important in a company and how successful the financial aspect is going to be.The financial management practices include capital structure decision, investment appraisal techniques, dividend policy, working capital management and financial performance assessment. A company needs to have well financial in order to be successful. “A company that sells well but has poor financial management can fail.” (Johnston)
The firm has decided to increase the debt finance component portion from 20% to 30% which is a good decision since the interest payments are 100% tax deductible. The appropriate capital structure would be to
The company position is strong enough so its better that company should use debt financing instead of equity financing.
Nevertheless, the use of the Optimal Capital Structure (OCS) is the right techniques to be used in order to acquire the right combination of debt and equity that can maximize the
Rajat Singh, a managing director at Hudson Bancorp, needs to find a way to rejuvenate the paper check corporation. One main part that needs to be calculated is the appropriate mixture of debt and equity for the firm. The company needs to determine the correct mixture so that they can both minimize the cost of capital and increase the shareholders value. I will analyze the current and future situation of the company, trying to find the correct credit rating to use that will increase income. With the new credit rating, I will be able to recommend a certain amount of debt for the company to take on and be profitable.
Generally, firms can choose among various capital structures in order to maximize overall market value of the company. It is proposed however, that
1. Why should a firm have a capital structure policy, i.e. a target debt ratio?
The course project involved developing a great depth of knowledge in analyzing capital structure, theories behind it, and its risks and issues. Before I began this assignment, I knew nothing but a few things about capital structure from previous unit weeks; however, it was not until this course’s final project that came along with opening
Debt financing is considered the fastest and cheapest method of financing growth of a company, however using debt to finance accelerated and explosive growth can have his drawbacks. The debt financing option enjoyed by Loewen kept shareholders stake in the business constant, and reduced the company’s tax liability. As shown in exhibit 4, from year 1989 to 1996 (excluding the special items regarding the law suits in 1995), the increase in debt (from 79.7 to 1428.6) led to an increase in EBITDA (from 21.4 to 251.9), operating profit(from 17.7 to 195.1) and net income (from 6.2 to 63.9), and led to an increase in the dividends paid throughout these years (from 0 to 11.4), and thus kept the shareholders happy. These results have encouraged investors to invest more in Loewen, and have encouraged Loewen to issue more debt to finance its acquisitions, until they arrived to a point where the debt to equity ratio became too high due to lots of reasons.
The purpose of this assignment is to study the finance sources available to a company. Here according to the assignment requirement, we have to select a British public company to study the available sources of finance from where the firm collects its capital requirement. Following the guidelines we have to analyze various sources with their potentiality and then we make viable analysis of Cash and sales budget. Here some salient financial ratios are employed for the purpose of analyzing the financial statement of the company.
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In finance, capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm 's capital structure is then the composition or 'structure ' of its liabilities. Simply, capital structure refers to the mix of debt and equity used by a firm in financing its assets. The capital structure decision is one of the most important decisions made by financial management. The capital structure decision is at the center of many other decisions in the area of corporate finance. These include dividend policy, project financing, issue of long term securities, financing of mergers, buyouts and so on. One of the many objectives of