九味书屋 > 文学经管电子书 > 30+mba >

第16部分

30+mba-第16部分

小说: 30+mba 字数: 每页4000字

按键盘上方向键 ← 或 → 可快速上下翻页,按键盘上的 Enter 键可回到本书目录页,按键盘上方向键 ↑ 可回到本页顶部!
————未阅读完?加入书签已便下次继续阅读!



accounts using such tools as ratios you need a reasonable grasp of both 
these areas; though the ratios themselves are generally considered to be in 
the accounting domain。 In this book the accounting and finance chapters 
have been placed next to each other to eliminate the need for debate on 
boundaries。 
In many business schools you will find an array of options in addition 
to the core elements of this discipline。 At the London Business School; 
for example; you will find asset pricing; corporate finance; hedge funds; 
corporate governance; investments; mergers and acquisitions; capital 
markets and international finance on the menu。 Members of the Finance 
Group also run the BNP Paribas Hedge Fund Centre; the Centre for 
Corporate Governance; the Private Equity Institute and the London 
Share Price Database。 At Cass Business School; City of London; you will 
find options on behavioural finance; dealing with financial crime; and 
derivatives。 In this chapter there is all that you would find in the core 
teaching that you need to understand and sufficient to move on to more 
esoteric aspects of finance should the need ever arise。 
2
Finance 53 
SOURCES OF FUNDS 
There are many sources of funds available to businesses; however; not 
all of them are equally appropriate to all businesses at all times。 These 
different sources of finance carry very different obligations; responsibilities 
and opportunities for profitable business。 Having some appreciation of 
these differences will enable managers and directors to make an informed 
choice。 
Most businesses initially; and o。。en until they go public; floating their 
shares on a stock market; confine their financial strategy to bank loans; 
either long term or short term; viewing the other financing methods as 
either too plex or too risky。 In many respects the reverse is true。 Almost 
every finance source other than banks will to a greater or lesser extent share 
some of the risks of doing business with the recipient of the funds。 
Debt vs equity 
Despite the esoteric names – debentures; convertible loan stock; preference 
shares – businesses have access to only two fundamentally different sorts 
of money。 Equity; or owner’s capital; including retained earnings; is money 
that is not a risk to the business。 If no profits are made; then the owner and 
other shareholders simply do not get dividends。 They may not be pleased; 
but they cannot usually sue; and even where they can sue; the advisers 
who remended the share purchase will be first in line。 
Debt capital is money borrowed by the business from outside sources; it 
puts the business at financial risk and is also risky for the lenders。 In return 
for taking that risk they expect an interest payment every year; irrespective 
of the performance of the business。 High gearing is the name given when 
a business has a high proportion of outside money to inside money。 High 
gearing has considerable a。。ractions to a business that wants to make high 
returns on shareholders’ capital。 
HOW GEARING WORKS 
Table 2。1 shows an example of a business that is assumed to need £60;000 
capital to generate £10;000 operating profits。 Four different capital structures 
are considered。 They range from all share capital (no gearing) at one end 
to nearly all loan capital at the other。 The loan capital has to be ‘serviced’; 
that is; interest of 12 per cent has to be paid。 The loan itself can be relatively 
indefinite; simply being replaced by another one at market interest rates 
when the first loan expires。 
Following the tables through; you can see that return on the shareholders’ 
money (arrived at by dividing the profit by the shareholders’ investment 
54 The Thirty…Day MBA 
and multiplying by 100 to get a percentage) grows from 16。6 to 30。7 per cent 
by virtue of the changed gearing。 If the interest on the loan were lower; the 
ROSC; the term used to describe return on shareholders’ capital; would be 
even more improved by high gearing; and the higher the interest; the lower 
the relative improvement in ROSC。 So in times of low interest; businesses 
tend to go for increased borrowings rather than raising more equity; that is; 
money from shareholders。 
At first sight this looks like a perpetual profit…growth machine。 Naturally; 
shareholders and those managing a business whose bonus depends on 
shareholders’ returns would rather have someone else ‘lend’ them the 
money for the business than ask shareholders for more money; especially if 
by doing so they increase the return on investment。 The problem es if 
the business does not produce £10;000 operating profits。 Very o。。en a drop 
in sales of 20 per cent means profits are halved。 If profits were halved in 
this example; the business could not meet the interest payments on its loan。 
That would make the business insolvent; and so not in a ‘sound financial 
position’; in other words; failing to meet one of the two primary business 
objectives。 
Table 2。1 The effect of gearing on shareholders’ returns 
No gearing Average 
gearing 
High 
gearing 
Very high 
gearing 
N/A 1:1 2:1 3:1 
Capital structure £ £ £ £ 
Share capital 60;000 30;000 20;000 15;000 
Loan capital (at 12%) – 30;000 40;000 45;000 
Total capital 60;000 60;000 60;000 60;000 
Profits 
Operating profit 10;000 10;000 10;000 10;000 
Less interest on loan None 3;600 4;800 5;400 
Net profit 10;000 6;400 5;200 4;600 
Return on share capital = 10;000 6;400 5;200 4;400 
60;000 30;000 20;000 15;000 
= 16。6% 21。3% 26% 30。7% 
Times interest earned = N/A 10;000 10;000 10;000 
3;600 4;800 5;400 
= N/A 2。8 times 2。1 times 1。8 times
Finance 55 
Bankers tend to favour 1 : 1 gearing as the maximum for a business; although 
they have been known to go much higher。 As well as looking at 
the gearing; lenders will study the business’s capacity to pay interest。 
They do this by using another ratio called ‘times interest earned’。 This is 
calculated by dividing the operating profit by the loan interest。 It shows 
how many times the loan interest is covered; and gives the lender some 
idea of the safety margin。 The ratio for this example is given at the end of 
Table 2。1。 Once again rules are hard to make; but much less than 3× interest 
earned is unlikely to give lenders confidence。 (See later in this chapter for a 
prehensive explanation of the use of ratios。) 
BORROWED MONEY 
Towards the lower…risk end of the financing spectrum are the various 
organizations that lend money to businesses。 They all try hard to take li。。le 
or no risk; but expect some reward irrespective of performance。 They want 
interest payments on money lent; usually from day one; though sometimes 
they are content to roll interest payments up until some future date。 While 
they hope the management is petent; they are more interested in 
securing a charge against any assets the business or its managers may own。 
At the end of the day they want all their money back。 It would be more 
prudent to think of these organizations as people who will help you turn a 
proportion of an illiquid asset; such as property; stock in trade or customers 
who have not yet paid up; into a more liquid asset such as cash; but of 
course at some discount。 
BANKS 
Banks are the principal; and frequently the only; source of finance for 9 out 
of every 10 unquoted businesses。 Firms around the world rely on banks 
for their funding。 In the UK; for example; they have borrowed nearly £55 
billion from the banks; a substantial rise over the past few years。 When this 
figure is pared with the £48 billion that firms have on deposit at any 
one time; the net amount borrowed is around £7 billion。 
Bankers; and indeed any other sources of debt capital; are looking for 
asset security to back their loan and provide a near…certainty of ge。。ing 
their money back。 They will also charge an interest rate that reflects current 
market conditions and their view of the risk level of the proposal; usually 
anything from 0。25 per cent to upwards of 3 or 4 per cent for more risky or 
smaller firms。 
Bankers like to speak of the ‘five Cs’ of credit analysis; factors they look

返回目录 上一页 下一页 回到顶部 0 0

你可能喜欢的