Syllabus Slam
_____________sources of finance – retained profits
internal
An internal source of finance
Retained profits
What does the acronyn PLEGS stand for
Profitability
Liquidity
Efficiency
Growth
Solvency
What does the acronym MUDL stand for
Mortgage
Unsecured Notes
Debentures
Leasing
Equity invested in a private company not listed on the ASX
Private Equity
DP2 _____________ of financial management
profitability, growth, efficiency, liquidity,_________ (PLEGS)
objectives
solveency
I occur after the IPO and give existing shareholders the opportunity to purchase more shares in proportion to the number of shares they already own
Rights issue
The mutual dep;endance (or reliance that KBF's have on one another). (100)
How are marketing and finance interdependent
interdependance
Answers will vary teacher to assess e.g.
Marketing requires funds for promotion activities such as advertising
Finance depends on marketing to keep to allocated budgets for promotional activity.
Two clear points about the meaning of 'secured'
The loan is guaranteed by an asset, such as the land or house. The lender uses this asset as security, which means that if you don’t make the agreed repayments the lender can take possession of the asset and sell it to cover the cost of the loan. This security means that the lender can offer a lower interest rate for the loan
Rights issue
Share purchase plan
________ – ordinary shares (new issues, rights issues, placements, __________________), ________ equity
equity
private
share purchase plans
A financial instituion where I business can arrange factoring
A finance company, specifically a factoring company
what is accounts receivable and where is it on the balance sheet.
Money that a business is owed by its customers, in the form of unpaid invoices. "Receivable" refers to fact that the business has earned the money because it has delivered a product or service but is, at that point in time, still waiting to receive the client's payment.
It is found in current assets on the balance sheet
What is an overdraft? (150)
Disadvantage of an overdraft
A bank product where a business withdraws money (up to a prearranged agreed limit) from their bank account below zero to address a temporary cash flow problem.
Disadvantages:
The cost of an overdraft is the fee to set up the overdraft and interest on the money used.
Interest is usually higher than bank loans
Occurs after the IPO and provides existing shareholders with the opportunity to purchase more shares.
Shareholders can purchase new shares in proportion to the number of shares they currently own.
Rights Issue
financial institutions – _________, investment banks, __________companies,____________________ funds, life insurance companies, ________________and the Australian Securities Exchange
banks
finance
superannuation
unit trusts
I provide a source of finance to a business. When I am sold investors become part of the company's profits over time. I am traded on the ASX and can be issued to shareholders in different ways.
Ordinary shares
Forumula for the balance sheet
Where would a mortgage appear?
Where would a propertay appear?
Where would inventory appear
Assets = liabilities + equity
Non-current liabilities
Non-current assets
Current assets
What is factoring? (200)
Advantage of factoring (200)
BONUS POINT (200) disadvantage of factoring
1. accounts receivable for a discounted price to a finance or factoring company.
2. This means the business gets instant cash flow.
3. Must pay a percentage of the AR to the factoring company which reduces current assets by the cost of the arrangement
New issue
Rights Issue
Placements
Share issues
external sources of finance
5.1 ______ – short-term ___________ (overdraft, _____________, factoring), long-term borrowing (mortgage, _______________, unsecured notes, _____________)
debt
borrowing
commercial bills
debentures
leasing
Offered to sophisticated investors or institutions and no prospectus is required.
Share Purchase Plan
sales
- cogs
= net profit
- expenses
=gross profit
A similarity between a debenture and an unsecured note
A similarity between a debenture and an unsecured note
- Similarity: Long term loan from an investor for a set period of time
Difference: a unsecured note is not secured again the business's assets so attracts a higher interest rate. A debenture is secured
Two types of ordinary shares where a prospectus IS required.
New Issue
Rights Issue