I have written this assignment mainly to complete course requirement of HND 1st semester. My task is related to the subject named as "Managing MONEY and Decision Making". I accumulated most information for this assignment from internet, my course publication and largely from the notes that I had collected from course lectures. Though I suffered bit troubles in completing this task but it was rather interesting and full of experience. I am hoping my work will be esteemed.
Mr. Javed wants to invest 5 million in an enterprise task in Pakistan. Some of his friends are prepared to make investments their capital with Mr. Javed but Mr. Javed does not want collaboration with someone.
There are three types of businesses designed for Mr. Javed which includes sole proprietorship, collaboration and firm.
Sole proprietorship: (one owner)
"It is a form of business which is run and supervised by sole person".
Explanation: It does not mean that singular proprietorship type of business won't have workers or assistants; it could have employees or assistants. In collaboration loss or profit belongs to the owner. In such type of business the owner of the business is taxed not the business.
Advantages: Such type of business is less expensive. Usually this kind of business will not require a great deal of legal formalities.
Disadvantages: liabilities are unlimited that is personal resources can be said. Owner cannot leave business for very long time that you cannot go for vacations etc because the business enterprise is totally based mostly to the dog owner. Life of the business enterprise depends upon the life span of the owner.
Partnership: (several owners)
"As its name suggests it is such type of business in which several owners are involved".
Explanation: partnership is basically an agreement, this is written or verbal there is not rule from the federal government that contract of relationship should be written but usually owners prefer written contract. In relationship business revenue and reduction and allocated among partners based on the agreement. In such kind of business the owners of the business enterprise are taxed not the business.
Advantages: It does not require a whole lot of legal formalities. Life of the business can be certain that it depends upon the arrangement and associates. Less amount of capital must run such business.
Disadvantage: Decision making is difficult in such type of business. Way too many conflicts may grow in such type of business. Liabilities are unlimited meaning personal resources can be stated.
"It really is such kind of business in several than two owners are participating, it is an artificial person, company's ownership differs from management".
Explanation: In such kind of business owner is named as shareholder and shareholder provide capital for working this business. The business enterprise is run by managers which are decided on by Panel of Directors and Managers. Profit and damage is allocated among shareholders, to create as dividend. In firm kind of business, business is taxed not the owners.
Advantages: Owner is can be easily copy by selling stocks. Life of the business enterprise does not rely upon the life of the dog owner. Liabilities are limited, personal investments cannot be stated.
Disadvantages: Numerous legal formalities must run this business. Development of the business is very hard. Massive amount capital is required to run this business. Due to retain getting shareholders self-confidence may loss because shareholders want more dividends.
Business that i have preferred for Mr. Javed:
Keeping in mind that Mr. Javed will not want to have partnership business. So I like Mr. Javed to begin an enterprise of singular proprietor because when i mentioned above it is simple to start, no legal formalities are required and less amount of capital is required. So I attended up with a concept of opening an educational institute, which should provide HND (Business) and HND (Computing) in Khyber Pukhtoonkhwa Pakistan, because quantity opponents are less and demand gets higher day by day. HND's studying formation is different and interesting when compared with the training system of Khyber Pukhtoonkhwa. Mr. Javed will require more amount of 3 million for this project. There are some factors which will ensure success of the project that are discussed below.
Factors which are important for the profitability:
There are different factors which evidently show that this project will probably be worth to start and is profitable. Some factors receive below.
Advertisement takes on great role in the success of any task before starting this projects people should be educated concerning this institute by advertising through T. V and billboards and through flyers etc. Special happenings of institute like parties and funfair etc also needs to be promoted by various methods.
Choosing a proper location is the key to the success of the project. The building should be good. Location for this project shouldn't be in such place where achieving for pupil is hard.
Class rooms of institute:
Classes should be well prepared with modern technology that is should have good quality multi-media, well furniture for the students etc that will satisfy and increase interest of students.
The main part of this job is the selecting of the personnel. Mr. Javed should employ the service of well qualified teachers. Since it educator who run an intuition. Personnel on institute should visit each class regularly, because absentees will disappoint students.
This institute should have reasonable fee. At the beginning institute must have as low cost as possible to be able to compete competitors. Fee prices must not be so high that people avoid this institute. Institute can increase payment with the duration of time.
Institute should issue scholarship to the smart students this will catch the attention of more students toward institute and there should be extra curriculum activities in institute.
Sports and Library:
Institute should be limited to studies only there should be proper arrangement for the sports activities for the scholar in order that they don't feel institute boring and there should well standard library in the institute that ought to have all the related course books and other literature as well.
Institute will need to have canteen in institute that ought to sell cool and clean foods and beverages, there must be internet facility in institute so that students face no problem in new studies. Different functions should be established by the institute because people and various seminars get students.
Task for P1:
Sources of financing defined:
Basically there are two main resources of finance internal sources of finance and exterior sources of funding. Sources of fund means from where you can make capital (money) to be able to run business. There are different sources of money which are described below.
Internal sources of finance:
Definitely before starting business the dog owner will have some capital (money), it isn't really indicate cash but it also include building, equipment etc which is called as internal source. A lot more you have internal source less would be the burden of loan on the owner. (GCSE business studies Finance and Accounting)
External resources of finance:
It involves sources which are not owned by the owner like bank, government grant, and loan from friends, leasing, factoring etc. (GCSE business studies Money and Accounting)
Sources of fund designed for Mr. Javed:
There are different sources of financing designed for Mr. Javed which is discussed below.
Loan from Lenders:
Banks are external sources of finance. Banks in return takes interest on loan. Standard bank provides you loan on the basis of four factors.
Bank will review your earlier record like how have you been in going back loan of considered before. You persona is checked.
Banks ask security for loan that is if tomorrow you are not capable of coming back loan the will take that one thing which you provided for loan security. Example bank or investment company will take legal record of land, building etc.
While taking loan from lender they might impost some legal condition of borrower like if you take loan from our loan provider you won't take loan from another lender till our loan is returned.
The bank bank checks the goal of the loan. Lenders will not offer you loan for operating illegitimate businesses.
Short loan for a short time frame from loan is called as loan provider over drafting. The banks do ask you for some interest on it and lender may impose some of their regulations.
Borrowing from specific:
It requires taking loan from your colleagues, friends or comparative to create as borrowing from individuals. Person in return will take interest. Individuals may provide you loan on below factors.
Loan will came back within sound time.
They impose interest.
When an effective business gives it patent and slogan to home based business. This is called as franchising. You can find two parties involved with franchising which is explained below.
Franchisee is a party who uses patent and slogan.
Franchiser is a party which gives patent and slogan.
Leasing is another way to obtain finance. It really is basically a agreement between two individuals, lessor and the lessee.
Lessor is the owner of the property.
A one who uses asset is called as lessee.
It is utilized in such conditions when the person needs asset for quite a while and the agreement is established by lessor and lessee. You can find two types of leasing.
It is the fact that type of rent which is ideal for short period of the time.
Leasing for long time frame is called as fund leasing. Lessee is supposed to be who owns the property till the leasing contract.
When government provides property, capital etc to our business this is called as grants. Federal government provides us grants when our business is helpful to society like providing occupation for contemporary society etc.
It is the fact that source of funding where third is engaged. This is called as factor firm. Basically it provides money contrary to the security of invoices (customer debtors). Factor corporation provides you capital (money) up to 80% of the invoice value. Factor firm will take control of managing invoices. Example: "A" order's goods from "B" on credit. When "B" needs money, it will consult factor corporation. So "B" gives its invoice to factor group. Following this "B" will be given 80% of the invoice then factor business will take control of invoice.
Concept of invoice discounting is as identical to factoring however the only difference in factoring and invoice discounting is the fact that in invoice discounting it does not have control of taking care of client's invoices.
Hire purchase: (HP)
It is also source of finance. When an individual or businesses buy goods on credit and pay money on installments is named as hire purchase. Additionally it is contain three parties which can be.
Hire purchase is comparable to leasing, the sole difference in leasing and work with purchase is the fact after doing installments of employ the service of purchase you become owner of that good etc, while in leasing you do not become owner of that good etc right after paying complete money.
Securities are general term used for a offer to repay the debts. The company which provides security over bad debts is called as debentures. They may be basically just like a company can take loan from an individual. The business will repay the debt with affinity for a certain time in the future. Both individuals and traders can use debt securities.
Task for P2:
Advantages and cons of the resources of finance:
There are different benefits and drawbacks of different sources of finance that happen to be reviewed below.
Load from lender:
Banks might provide good amount of loan based on assembling your project.
Banks also provide loans for very long time.
If borrower pays loaned amount before deadline, banks might provide debtor with discount like decrease in interest etc.
Too much paper work must take loan from loan provider.
Borrower must definitely provide security for loan.
Security provided for the loan can be taken as bank's property if loaned amount is not paid.
If loan debtor does not payback loan promptly interest rate may be increased by the lender.
Loan from individuals:
It is simple and easily acquirable.
Borrower doesn't need to provide security on taking loan.
Lender may expand deadline of paying back loan by negotiation of debtor.
Personal property can be said if loaned amount is not paid.
Loan must be paid on time.
Clashed may occur on late payment.
Company increases a great deal of revenue.
Investors get profit by taking hobbies.
In debts securities there a benefits of duty as well.
The investor should be given interest whether the company is in damage or in income.
Investor will get their money on the time which is set in contract.
Too much newspaper work is not required by firmly taking overdrafts from bank.
Bank overdraft is good for short period of energy.
You won't need to give standard bank security while taking overdrafts from lender.
You can only just take specific amount of overdraft which is provided by the bank.
The loan company may implement some of their regulations like interest or specific time to give again over drafted amount.
Bank might ask you for on providing service of overdraft.
Purchaser becomes owner of the advantage after completing installments.
After installments purchaser become owner of the property.
Usually price of goods or resources are higher when compared with original price in employ the service of purchase.
Purchaser is not supposed to be who owns the goods or property till the completion of complete repayment.
If payment is not given lender can retake goods or property back from employ the service of purchaser.
Lessee is supposed to be owner of the leased advantage or good till the leasing arrangement.
Lessee gets the mandatory property or good without paying complete amount at the same time.
Inflation will not have an impact on leasing because arrangement once done cannot be changed until contract date is finished.
Lessee will not become owner of the leased asset or good after paying complete amount as said in agreement.
Leasing rates can vary greatly after agreement is completed.
Lessor does not have the right to change or to finish contract before its completed date.
Grants are free.
Grants do not require to be paid back.
Grants not given without proper regulations.
Difficult to achieve grants because they have got tough competitors.
Large amount of capital (money) is gained in short time.
Factor organization calls for control of client's invoices.
This system assists with controlling cashflow problems and helps in maintaining good business
Clients usually do not such as this source because factor corporation will take repayments from them.
Factor business charges interest and fees on providing services.
Privacy becomes nil because clients invoices becomes invoices of factor business.
Franchisee does not need to spend money on ad and advertising.
Franchisers cannot make another franchisee, where one franchisee can be found.
Franchisee does not need to get worried about customers because franchiser already has customers.
It is quite expensive.
Franchisee will run business as led by the franchisors.
Franchisor might stop conducting business in the foreseeable future.
Task for P3:
Sources of fund which are feasible for Mr. Javed:
Mr. Javed will require finance of rupees 3 million more because to make this task successful Mr. Javed must have good amount of capital. . Plus Mr. Javed will need to take a building for institute will cost excess amount. There are different sources of finance available for Mr. Javed, but most possible sources for this project are
Mr. Javed will need more amount of 3 million so the best source can be loan provider. Because bankers offer loan for long time.
Leasing is important for Mr. Javed because for this project land (building) is important so buying building will definitely cost Mr. Javed a great deal so rather than buying building its better to lease building.
Task for M1:
Justifications and implications of suggested sources:
Bank provides loan of large capital (Money).
Loan can be taken from loan provider for long period of time.
If the task earns gain giving loan back to bank before deadline Mr. Javed can get discount as well.
Once you begin relationship with loan company, bank can further help you with an increase of amount of money.
Bank might offer Mr. Javed for relationship which will take place by will of Mr. Javed.
Bank also provides discount in interest rate by paying loaned amount before scheduled time.
It will be cheaper as compared to buy building for the job.
Leasing is easy to get at. Building for leasing are available all over Mr. Javed needs.
If Mr. Javed earns earnings if he wants to buy the leased building he is able to but this will take place following the will of lessor.
Instead of shopping for building leasing is way better because if Mr. Javed wants to alter his institute to somewhere else he would easily do this without having pressure of selling bought building.
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