Business Report Template

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School

EAFIT University *

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Course

MISC

Subject

Finance

Date

Nov 24, 2024

Type

docx

Pages

Uploaded by PrivateSteel7879

Australian Harbour International College RTO ID: 41338 CRICOS Provider Code: 03449J ABN: 74 603 036 102 T: 02 9268 0085 E: admissions@ahic.edu.au W: www.ahic.edu.au A: Level 4, 114-120 Castlereagh Street Sydney NSW 2000 Australia Oz Quality Toys Business Report Business structures 1. Sole Proprietorship:  Advantages:  Simplicity: A sole proprietorship is the simplest and least expensive business structure to set up. Mary and Mike will have full control over the business.  Tax Benefits: Profits and losses are reported on their personal tax returns, which can provide tax benefits for a small business.  Decision-Making: They can make quick decisions without needing approval from partners or shareholders.  Disadvantages:  Unlimited Liability: Mary and Mike will be personally liable for business debts. Their personal assets, including their house, are at risk.  Limited Resources: Access to capital might be limited to personal savings or loans. 2. Partnership:  Advantages:  Shared Responsibility: In a general partnership, Mary and Mike can share the workload and decision-making with other partners.  Tax Benefits: Profits and losses are passed through to the partners and reported on their personal tax returns.  Capital: Partnerships can attract additional capital from multiple partners.  Disadvantages:  Unlimited Liability: Like a sole proprietorship, general partners have unlimited personal liability.  Conflict: Disagreements among partners can arise, potentially leading to disputes and affecting the business.  Shared Decision-Making: Partners may not always agree on business decisions. 3. Pty Ltd Company (Proprietary Limited Company):  Advantages:  Limited Liability: The personal assets of Mary and Mike are protected. They are only liable for the amount they invest in the company.  Separate Legal Entity: A Pty Ltd company is a separate legal entity, making it easier to raise capital, enter contracts, and carry out business activities.  Perpetual Existence: The company continues to exist even if the owners change.  Disadvantages:  Complexity: Setting up and maintaining a company involves more administrative tasks, record-keeping, and compliance with regulatory requirements. Australian Harbour International College, 114-120 Castlereagh Street, Sydney NSW 2000, Australia |RTO NO: 41338 | CRICOS Provider Code: 03449J Filename: FNSACC521 Provide financial and business performance information Version 1.0/ Jan 2023 Review Date: Nov 2023 Page 1 of 4

Australian Harbour International College RTO ID: 41338 CRICOS Provider Code: 03449J ABN: 74 603 036 102 T: 02 9268 0085 E: admissions@ahic.edu.au W: www.ahic.edu.au A: Level 4, 114-120 Castlereagh Street Sydney NSW 2000 Australia  Costs: Establishing and running a Pty Ltd company may incur higher setup and ongoing costs compared to sole proprietorships or partnerships.  Taxation: Pty Ltd companies are subject to corporate tax rates, which can be higher than individual tax rates. However, this structure offers more flexibility for distributing profits. For Mary and Mike, the choice of business structure should consider their risk tolerance, desire for simplicity, and plans for growth. Given that they have no dependents and wish to manufacture high- quality educational toys, a Pty Ltd company might be a suitable option, as it offers limited liability and can attract outside investment. However, they should consult with a legal and financial advisor to make the best choice based on their specific circumstances. Additionally, they should explore sources of finance such as personal savings, loans, or potential investors to secure the $70,000 start-up capital. Forms of funding 1. Short-Term Funding Options:  Personal Savings: Mary and Mike can use their personal savings to cover initial operating expenses, purchase raw materials, and set up their manufacturing facility. This is a convenient and interest-free source of short-term funding.  Trade Credit: They can negotiate trade credit terms with suppliers. This means they receive the goods now and pay for them at a later date, often within 30 to 90 days. Trade credit can help manage short-term cash flow and working capital needs. 2. Long-Term Funding Options:  Bank Loans: To secure long-term financing, Mary and Mike can apply for a business loan from a bank or financial institution. These loans typically have lower interest rates and longer repayment terms. They can use the loan to purchase equipment, lease or build a manufacturing facility, or invest in marketing.  Angel Investors or Venture Capital: If they require a substantial amount of capital, Mary and Mike can seek investment from angel investors or venture capitalists. These investors provide funding in exchange for equity in the company. Venture capital is typically aimed at high-growth startups, while angel investors may be more suitable for smaller businesses.  Small Business Grants and Subsidies: They should explore whether there are government or private sector grants or subsidies available to support their business. These funds may be provided to encourage growth in specific industries, regions, or for businesses pursuing particular goals, like manufacturing high-quality educational toys.  Retained Earnings: As their business grows, they can reinvest a portion of the profits into the company. This is a form of long-term funding that can help finance expansion, research and development, and new product lines. Australian Harbour International College, 114-120 Castlereagh Street, Sydney NSW 2000, Australia |RTO NO: 41338 | CRICOS Provider Code: 03449J Filename: FNSACC521 Provide financial and business performance information Version 1.0/ Jan 2023 Review Date: Nov 2023 Page 2 of 4

Australian Harbour International College RTO ID: 41338 CRICOS Provider Code: 03449J ABN: 74 603 036 102 T: 02 9268 0085 E: admissions@ahic.edu.au W: www.ahic.edu.au A: Level 4, 114-120 Castlereagh Street Sydney NSW 2000 Australia The choice between short-term and long-term funding options will depend on the specific needs of Oz Quality Toys. Short-term options can help cover immediate expenses and manage cash flow, while long-term funding is more suitable for capital expenditures and long-term growth. Mary and Mike should carefully assess their financial requirements and consult with a financial advisor to determine the most appropriate sources of funding for their business. Recommendations Short-Term Financial Options: 1. Personal Savings:  Action: Mary and Mike can assess their personal savings and create a detailed budget to understand how much they can invest in the business. They should be prepared to contribute a portion of their savings as initial capital. 2. Trade Credit:  Action: They should identify key suppliers for materials and establish relationships with them. Negotiating favorable trade credit terms can help them manage their working capital effectively. Long-Term Financial Options: 1. Bank Loans:  Action: Mary and Mike should approach local banks or financial institutions and apply for a business loan. They need to prepare a solid business plan, financial projections, and a detailed explanation of how the loan will be used. They should also be ready to provide collateral if required. 2. Angel Investors or Venture Capital:  Action: If they opt for external investors, they need to create a compelling business plan and pitch. They can reach out to local angel investor networks or venture capital firms, seeking meetings and presenting their business idea. They should be prepared to give up equity in exchange for investment. 3. Small Business Grants and Subsidies:  Action: They should research government grants, subsidies, or incentives for manufacturing and Australian-made products. Application processes and eligibility criteria can vary, so they need to carefully review available opportunities. 4. Retained Earnings:  Action: Mary and Mike can start planning for reinvesting profits back into the business once it starts generating income. This might include setting up a dividend policy that outlines how much of the profits will be reinvested and how much will be distributed. Additional Actions to Secure Funding:  Consultation: Seeking advice from a financial advisor or accountant can provide insights into the best financing options for their specific business model.  Business Plan: Develop a comprehensive business plan that outlines the company's mission, vision, target market, competitive analysis, financial projections, and a clear funding request.  Legal Structure: Decide on the legal structure for their business (e.g., sole proprietorship, partnership, company) as it can affect the ease of raising funds and the liability of the owners.  Pitch and Networking: Prepare a strong pitch for potential investors and join local business networks to connect with angel investors, venture capitalists, and other entrepreneurs. Australian Harbour International College, 114-120 Castlereagh Street, Sydney NSW 2000, Australia |RTO NO: 41338 | CRICOS Provider Code: 03449J Filename: FNSACC521 Provide financial and business performance information Version 1.0/ Jan 2023 Review Date: Nov 2023 Page 3 of 4

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Australian Harbour International College RTO ID: 41338 CRICOS Provider Code: 03449J ABN: 74 603 036 102 T: 02 9268 0085 E: admissions@ahic.edu.au W: www.ahic.edu.au A: Level 4, 114-120 Castlereagh Street Sydney NSW 2000 Australia  Due Diligence: Carefully evaluate the terms and conditions of any external financing options, ensuring that they align with the long-term goals of Oz Quality Toys. Each of these actions is essential in securing the required funds and ensuring the financial stability of Oz Quality Toys. The choice of funding sources will depend on their specific financial situation and business strategy. Australian Harbour International College, 114-120 Castlereagh Street, Sydney NSW 2000, Australia |RTO NO: 41338 | CRICOS Provider Code: 03449J Filename: FNSACC521 Provide financial and business performance information Version 1.0/ Jan 2023 Review Date: Nov 2023 Page 4 of 4