Ms Lewis has Invested £100000 into Natura a Shop Selling

Assignment Task

Questions

a. Ms Lewis has invested £100,000 into Natura, a shop selling natural and organic beauty products. The business has recently shut down and is unable to fulfil payment obligations worth £190,000. The business has no cash in its business bank account, is owed no money by customers, and has no inventory to sell. In short, the business has no assets it can use to satisfy its obligations.

Advise Ms Lewis on the current state of her investment and the amount that she is liable for in each of the following situations:

i. Natura is a sole proprietorship owned by Ms Lewis.

ii. Natura is a partnership owned 50:50 by Ms Lewis and Mrs Taylor.

iii. Natura is a private limited company (Ltd) owned 60:40 by Ms Lewis and her sisters. 

b. For each form of the above-identified business
organisations, discuss in your own words the advantages and disadvantages in terms of:

i. ability to raise finance

ii. decision-making

iii. profit distribution

Tests your knowledge of the liability a business owner is subject to in the case of sole proprietorships, partnerships, and private limited companies. Your answer should identify Ms Lewis' potential loss of investment and the amount of payment (if any) that she will personally be obliged to make. You should provide an explanation of how you arrived at your conclusions for each of the scenarios.

Following on from part (a), Question 1 part (b) requires you to discuss in your own words the business owner(s)' 

• What long-term investment decisions will you have to advise on and evaluate?
• What sources of funding might you recommend for such long-term investments?

a. Yoyo is a company providing delivery services for the food and beverages sector. Yoyo's management is considering the use of factoring to reduce the cost of credit control by €55,000 per annum. The identified factoring company will charge a fee of 2.5% of sales. It will provide an advance to Yoyo company of 80% of its receivables and charge interest on this advance of 10% per annum.

i. Assess whether it is financially beneficial for Yoyo to enter this factoring arrangement, considering that it currently has average trade receivables of €350,000 and annual sales of €1.2 million. Show all your workings.

ii. Considering your answer to the previous point, as well as wider aspects, discuss the possible advantages and disadvantages of factoring.

Explain why an organisation might decide to:lease an asset instead of buying it for its expansion plans

a. Discuss the key factors that a lender should consider when thinking about whether to grant a long-term loan to a business.

b. GreenF is a private company established in Germany in the 2000s by Miriam Verstenn, an entrepreneur who currently owns 70% of the company. GreenF produces components for the green energy industry such as wind and solar energy farms and has seen strong growth over the years. The global energy crisis and transition put GreenF in a position of even greater growth potential, particularly at an international level. The company will require substantial new equity capital to finance this expansion. Advise Ms Verstenn on the attractions and risks of raising the required equity through an IPO of shares.

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