Proper management of financial resources and by undertaking effective decisions provide aid to Tesco through which they can expand their business services in rapid manner in low cost. For this listing company in London stock exchange assist organisation to raise required capital. It required proper evaluation of certain questions.
- Different sources of finance available to entity.
- Execution of finance as resources in company processes.
- Formation of financial decisions by evaluating financial informations.
- Analyse business organisation financial performance.
Managing financial resources and decisions are important for the company to attain benefits. Present report deals with scenarios in which financial resources are analysed and viability of performance of company is judged. Calculation of WACC, financial ratios and capital appraisal techniques are made in effective way. Moreover, discussion about LSE is also made. Moreover, budget is prepared for the firm. Thus, it can be said that company is benefited by managing financial resources and as such, immense benefits are attained with much ease. Moreover, the study is comprises with the effective accounting financial techniques which in turn helps in bringing the satisfactory rise in the revenue and the growth of business. There will e presentation of various forecasted budgets such as production, sales and income statements for the period. That enables professionals in terms of analysing the benefits and profitability of business in the coming time.
TASK 1 Advantages and disadvantages of listing on London Stock Exchange
London Stock Exchange (LSE) is one of the oldest and biggest stock exchange where securities are traded in. There are various advantages and disadvantages of listing on the stock exchange. These are discussed below-
1. One of the main advantage of listing on LSE is that access to the wider market and as such, more capital can be garnered by raising shares through public offering. Thus, Milner Chemicals Plc may be able to finance its activities in the best possible manner.
2. Listing on stock exchange helps to spread ownership risk among shareholders in effective way. Furthermore, liquidity position can be enhanced in a better way. Moreover, investors' will invest in the shares of company as it offers more security than organisation not listed in the exchange (Rockey and Collins, 2010).
3. Another advantage is that Milner Chemicals Plc may be able to acquire organisation in order to double its growth and reduce competition in the market in effective way. Thus, organisation can easily acquire another firm by listing on the stock market.
4. Shareholders' base can be broaden by the firm by listing as organisation is able to raise capital by effectively as more of the investors will invest in the securities of the company in the best possible manner.
5. Next advantage of having listed in the stock exchange is that employees become motivated as they may be provided with the ESOS (Employees Stock Option Scheme) and thus, they are encouraged in a better way.
1. Listing on stock exchange is helpful for company but has certain disadvantages as well. One of the main disadvantage is that market susceptibility may be inculcated which may ruin market price of shares as control is not initiated and thus, organisation has weakened liquidity position. It would be disadvantageous to Milner Chemicals Plc as it is small company which may suffer from the liquidity quite adversely (Snell, Morris and Bohlander, 2015).
2. Loss of potential control upon the exchange is attained as shareholders' wants to achieve higher returns on the investment made by them and as a result, organisation becomes under pressure and liquidity position is affected largely.
3. Another disadvantage of listing is that various formalities are required to be accounted for by the organisation. In simpler words, floating process, listing on subsequent basis and related disclosures affects firm as it has to comply with such formalities which are not found in the case of private company.
4. Privacy of organisation is lost as it has to provide greater disclosures to the external shareholders so that they may be able to take enhanced decisions regarding the company. This helps them to take decision whether to invest in organisation or not. Moreover, directors has to provide information and privacy is lost which they can accomplish in private firm with much ease (Vassolo, De Castro and Gomez-Mejia, 2011).
5. There are various costs and fees which are required to be paid by the company when it is being listed on LSE and as such, these increases overall expenses of firm. These includes additional capital, floatation and existing listing expenses to name a few.
2. Discussing methods of obtaining a listing in the exchange
There are various methods by which Milner Chemicals Plc can easily avail the listing on LSE. Mainly, in LSE, there are two markets where listing could be possible through use of GDR (Global Depository Receipts). They are as follows-
1. Main Market:
It is one of the market where company chooses to list on Main market and the organisation has to follow the rules of EU markets and rules enacted by FSA, listing and disclosure rules and all the risk factors in the best possible manner. The requirements of such listing are prospectus prepared according to prospectus drive which includes rules of IFRS as well. Three years of history of trading is required to be fulfill by Milner Chemicals Plc and to provided to Main market for easing off listing procedure. Minimum of 25 % of floated DR in hands of public and capitalisation of GDR of minimum of 700,000.
2. The Professional Securities Market:
It is another market which can be availed by company in effective way. It is operated by LSE with the scope of Recognised Investment Exchange. This market is accessible to the wholesale investors which likes to invest in optimum quantity in the best possible manner. The listing requirements of PSM is different. It requires past three years of financial statements which should be audited and minimum of market capitalisation of 700,000 which is same as Main market rules. Moreover, GAAP guidelines should be utilised in formulating the prospectus with much ease (Post and Byron, 2015).