Medium and long term loans
Long term loans can be arranged in direct negotiation with financial institutions and other financial markets.
Bill of sale and Mortgages
A bill of sale is a mortgaged loan taken out against specific assets. When the asset specified in the instrument is either land or property, the debt is called mortgage. Loans raised against the security of all other goods and chattels are recorded as bills of sale.
Assessing the capital structure
A factor of interst in all balance sheet is the volume and proportion of capital debt to other assets and capital balances. The item of great importance is the cost to the firm of its existing capital structure. The efficient financial manager will want to know what changes that can be effected to lower the cost.
Gearing
The gearing ratio is the amount that N1.00 ordinary share capital bears to the fixed interest bearing capital. A low geared company is one in which the ordinary share capital exceeds the fixed interest bearing capital and a high geared company is one in which the ordinary share capital is less in proportion than the fixed interest bearing capital
When establishing a business, it is necessary to decide the minimum
output that will yield returns sufficient for the business to be carried on at a reasonable profit. Technical advice of the best kind is needed as to the equipment and raw materials required to produce a minimum volume and the total cost of production per unit. The next point is whether there will be a market available that will absorb at least this minimum output at a price which will allow a sufficient margin of profit.
Delay in completing orders will mean loss of business and may damage the reputation of the concern.
For example, in estimating the capital requirement of a manu- facturing concern, it is necessary to consider the following:
(a) Cost of the necessary land and erecting of factory.
(b) Cost of patents, secret processes, trade marks, goodwill etc.
(c) Initial expenses - which include promoters' fees, registration
expenses, advertising and the cost of issuing prospectus.
(d) Working capital which is the excess of current assets over current liabilities.
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