Tag (SQ): Disadvantages
Search
500
+ past questions and counting.
- 20 Marks
BCL – L1 – Q61 – Alternative forms and constitutions of business organisations
Recommend whether Hajia Amina’s business should remain a sole proprietorship or convert to a private limited company.
Question
Your mother trades in locally made fruit juice in a container at the front of the house at Adiembra-Zongo. The booming business is putting pressure on her working capital. But she plans to open two new retail branches and a semi-wholesale by the end of the year using sale proceeds of her private car which will not be enough. A bank manager working on her personal loan application advised her to convert the sole proprietorship into a private limited liability company, but your mother thinks that will reduce her power and influence. She adores the business name registration certificate with her name boldly engraved ‘HAJIA AMINA SIEDU ENTERPRISE’.
(a) Which of the options will you recommend?
(b). Discuss why you would support your mother’s position or that of the bank manager.
Find Related Questions by Tags, levels, etc.
Report an error
- 10 Marks
BCL – L1 – Q52 – Alternative forms and constitutions of business organisations
State two advantages and two disadvantages of forming a sole proprietorship.
Question
It appears that many residents of Kumasi prefer to own their businesses without going through the cumbersome details of forming an incorporated company limited by shares.
Required:
State TWO (2) advantages and TWO (2) disadvantages of forming sole proprietorship.
Find Related Questions by Tags, levels, etc.
Report an error
- 15 Marks
FM – L2 – Q112 – Management of receivables and payables
Calculate the profit impact of using a debt factor for Nsawkaw Tech Solutions Limited and comment on the findings.
Question
Nsawkaw Tech Solutions Limited is a software business owned and managed by computer software specialists. Although sales have remained stable at GH¢40,000,000 per annum in recent years, the level of trade receivables has increased significantly. A recent financial report submitted to the owners indicates an average settlement period of 60 days for trade receivables compared with an industry average of 40 days. The level of bad debts has also increased in recent years, and the company now writes off approximately GH¢40,000 in bad debts each year.
The recent problems experienced in controlling credit have led to a liquidity crisis for the company. At present, the company finances its trade receivables by a bank overdraft at an interest rate of 14% a year. However, the overdraft limit has been exceeded on several occasions in recent months, and the bank is now demanding a significant decrease in the size of the overdraft.
To meet this demand, the owners of the company have approached a factor who has offered to make an advance payment equivalent to 85% of trade receivables, based on the assumption that the level of receivables will be in line with the industry average.
The factor will charge a rate of interest of 12% a year for this advance. The factor will take over the sales records of the company and, for this service, will charge a fee based on 2% of sales. The company believes that the services offered by the factor should eliminate bad debts and lead to administrative cost savings of GH¢52,000 per year.
Required
(a) Calculate the effect of employing a debt factor on the profit of Nsawkaw Tech Solutions Limited. Comment on your findings.
Note: You may assume 360 days in a year.
(b) State FIVE potential advantages and TWO disadvantages of using the services of a debt factor by a business organisation.
Find Related Questions by Tags, levels, etc.
- Tags: Advantages, Business Operations, Credit Control, Debt Management, Disadvantages, Factoring
- Level: Level 2
Report an error
- 10 Marks
FM – L2 – Q30 – Financial markets
Outline advantages/disadvantages of stock exchange listing and types of issue costs associated.
Find Related Questions by Tags, levels, etc.
- Tags: Advantages, Disadvantages, Equity Finance, issue costs, listing, public quotation, Stock exchange
- Level: Level 2
- Topic: Financial markets
Report an error
