The aim of this unit is to make learners understand how to access different sources of finance for running business activity and skill for financial decision making.
- Give brief of source of finance available for business.
- Demonstrate the implication of finance as a business source
- Develop financial decision based on financial performance of Milner Chemical Plc
- Examine financial business performance of Milner Chemical Plc
INTRODUCTION
Managing financial is very important aspect of each and every organization. The present report is giving brief about the sources of finance which are available to business. The implications of finance as resource within the business has been elaborated by analyzing costs of various sources. Further it has been briefed about financial decisions according to financial information.
Task 1
1.1 Merits and demerits of listing in stock exchange
The benefits while listing in stock exchange can be in various forms like it provides access to capital which will help Milner Chemical Plc for raising finance for development even at the time of admission and via raising more capital (Rahman, And et.al., 2017). It will create rise in profile i.e. it will create demand for shares and it will improve the liquidity of Milner company as many investors prefer to invest in business which is listed on the main exchange as theyare more comfortable, opportunities and for the issue of security. While listing on market, it facilitates acquisitions or increases the ability of Milner Chemicals Plc for acquisitions with listed shares as currency. Market valuation for the business has been created and all the opportunities are enabled to raise fund and for expansion. Valuation has been objected as it helps in creating independent value of business of Milner Company. The base of shareholder has been broadened as it has created a market for the share of company. In the same series, shares have been used as the employee incentive for giving motivation for long term i.e. improves employee commitment. It improves investor, supplier and customer's confidence and the position in marketplace.
It provides pure access to a currency acquisition and transparency related to the valuation of busienss. The companies which listed uses shares instead of cash for acquisitions. This is a perfect measure for applying buy and build strategy when cash ha snot been properly optimised in other areas. The value of the business has been determined objectively by market not like private company as requirement of assessing the relative value of the two business which are different to each other. Employee commitment has been encouraged by giving them rewards which represents clear value. The employees of listed company are gaining more advantage if they have been allotted shares or options by which they can easily observe their worth. The public profile has been heightened and it improves the capability for attracting high calibre members of board. To get more talent with respect to business, the liquidity of the company which is listed gives the best incentive plan.
These issues should be considered by Milner Plc while listing on stock exchange like market fluctuations, compliance and cost related to listing (Rubin and Patel, 2017). The market got fluctuated by many external factors which consist of social, economic and political change as all these will be affecting the share price of company in positive manner and even negative manner. If the organisation is listed publicly, there is requirement of complying with the code of United Kingdom with respect to Corporate Governance. The companies which are public are directly linked to the property of public as they are purely expected for complying the rules of the market which are populated by them. The services of nominated advisor have been used by the companies on AIM and firm which are listed on London Stock Exchange, acts as the main regulator of business and its listing should be managed with ongoing compliance. The shares which are issued not only diluted but they also lack liquidity. Fundraising and activity of acquisition is undermined because of less demand of the shares. Lack of demand will generally convert into less share price and its application of shares as currency of acquisition will lose its appeal. The amount of significant costs and time related to flotation and its ongoing listing must not be underestimated. The beginning of flotation process consumes so much time and its administration of announcements which are regular and constant. There are many other activities which should be managed so in short it is very time consuming and labour intensive which does not match the business.
1.2 Discussing the steps for listing Milner Chemicals Plc in London Stock Exchange
The major steps for listing Milner Plc on the London Stock Exchange:
Advisors should be appointed and those advisors must have the relevant public experience and proper recommendations should be undertaken for appointing new ones. Every advisor has significant role in the process of admission as:
- Corporate advisor
- Broker
- Reporting accountant
- Lawyer
Corporate advisor is also known as sponsor, he advises for listing on premium basis as he is appointed for guiding company via admission or application process. The companies who need to be standard listing, corporate advisors are required (Zhang and Reay, 2018).
Broker will be observing prices of shares which will be generating interest in business via promoting or marketing when company is purely admitted for trading.
Accountant will be reviewing the company independently with its financial position and he will generate many reports for achieving specific regulatory requirements and directors should be assisted and for accomplishing the obligations, sponsor should be assisted.
Lawyer has the ability to understand legal issues which might arise with the admission in main market which consists of all the requirements related to disclosure and obligations which are continued.
The main requirements which should be complied are as follows: business should be established or incorporated with some specific laws which have to be undertaken. Accounts should be audited, filed and published for specific three year time. Trading records should be traced for particular time and must be able to reflect the working capital for this particular period. The minimum market capitalisation for equity is 700000 pounds and for debt it is about 200000. The 25 percent of shares must be specifically held by public. The essential requirements should be reported and obligations should be continued for listing on London Stock Exchange. The insider information should be disclosed as soon as possible via Regulatory Information service. Insider information leaks in publicf then it will directly impact share price or the instruments which are related to financial. Annual and semi annual reports of financials which consists of financial information which is consolidated for specific period. Any of the shareholder who has acquired 3% or more of voting share capital of company should disclose information to the market and company. There is requirement of shareholder approval of premium listed companies before undertaking disposal or acquisition. All the transactions which are substantial even smaller transactions should be justified or notified in market. The directors who are dealing in shares of company should give proper disclosure to the business and notifying in the market.
Before listing Milner Plc, there are various aspects which should be reviewed such as assets and liabilities, shareholder arrangements, share capital, contracts, intellectual property and insurance.
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