Board of Directors
· Tops of Business
· Invest in Business – Make main decisions
· High number of shares
· Substantial amount of capital
· AGM – Annual General Meeting (1-2 a year) – businesses financial state is assessed, account records revealed to shareholders.
Financial Issues to Consider
· Pricing Strategies
· How are profits Distributed / Undistributed
· Amount of dividends / Links to share prices
· If business is looking to progress in the future, dividends may be decreased so company can further develop.
As a Company Expands:
· Shares likely to increase in value
· Number of shareholders likely to increase
· Communication in business becomes more difficult
· Increased brand awareness
· Increased advertising and marketing
· Increased Costs – wages, stock, material and production, marketing economies of scale, Diseconomies of scale – unit cost increase.
| | Advantages | Disadvantages |
| Sole Traders | · Individual sets up business on their own. · Make all Decisions · Quick Process · Keep all profits · Direct contact with market | · Unlimited Liability · Limited sources of finance · Work Load |
| Partnerships | · Other people can take responsibility · More Business ideas · Business continues in event of death of partner · More Skills Variety – More Partners | · Unlimited Liability · Share of profits · Less control · Different opinions can be problematic |
| Private Limited Company (LTD) | · Limited Liability · Shares not sold to public – no outside interference · No risk of takeover/merger | · Expensive to run · More tax · Less access to finance · Private accounting · Possible to dispute between friends and families. |
| Public Limited Company (PLC) | · Limited Liability (personal assets can be taken by bank) – in event of bankruptcy. · Increase levels of finances · Increased publicity and Brand Awareness | · Lose control of business because many shareholders. · Other businesses can invest –problematic |
| Non Profit Making | · Low prices (causes problems for competition) · Profits linked to objectives · Low wages | · Low wages · Possible government issues · Unlikely investors |
Factors to consider before choosing Source Finance:
· How much do they need to borrow?
· Level of Risk
· How long it will take to pay it back
· Previous Financial records
· Businesses financial position/current income
· Interest Rates (Banks/Loans)
· Ads/Dis of source of finance
| | Possible Sources of Finance | Key Issues for Consideration |
| Sole Trader | · Owners Savings · Banks · Suppliers · Government Grants and Loans | -Security for those lending funds. -Loss of Control by owner. -Evidence that the business has potential to develop. -Financial History of the business/owner. |
| Partnerships | · Owners/Partners Savings · Banks · Suppliers · Government Grants and Loans · Leasing and Purchase Companies | -Problems of introducing a new partner. -Lack of Collateral. -Potential expense of raising large sums of money. -Should they form a limited company? |
| Private Limited Company (LTD) | -Dependent upon the size of the LTD. · Suppliers · Banks · Leasing and Purchase Companies · Government Grants and Loans · Venture Capital · Institutions · Private share Issues · Factoring | -Disagreement amongst existing shareholders. -Difficulty of finding suitable shareholders. -Loss of control by existing shareholders. -Lack of collateral and security for those lending funds. -Element of risk in the loan. |
| Public Limited Company (PLC) | · Suppliers · Banks · Factoring · Leasing and Purchase companies · Government Grants and Loans · Venture Capital · Institutions · Public share issues via Stock Exchange | -State of economy and stock market. -Ability to move to an receiving government aid. -Recent financial performance. -Reputation of company and senior managers. |
| Non Profit Making Organisation | · Charitable donations · Government and EU Grants | -Public Profile. -Relationship with Government. |
