Financial management for small business: Sample paper

Question 2

North Star offer

Funding Go3D by North Star will of a beneficial factor in general; The major pros involved within the investment is that it provides a short stage funding time since it has promised to be paid off in a period of 2 years. On the other hand, North Star being a long partner with the business entity there exists trustworthiness and an assurance of future cooperation. The business development a continuity as well depends on the marketability of its products, North Star being a well-known organization within the North East England with a good reputation through its various connection it would a good gate way to Go3D in easily accessing the market in the name of North Star.

As argued by (Zhang, 2016), having equity investment within a developing business may be beneficial in easily acquisition of development capital but it as well serves as the manner in which the business may be losing its stake holdings. Among the advantages that Go3d may receive or has received from the North Star offer ids the large amounts of funding is for instance the funding firm had offered a $ 40,000 funds plus easy acquisition of a $ 100,000 for the continuity of the business activities. The kind of money offered has been very massive to the business development. Among the other advantages that may be accompanied by north star Offer is the ability of the business to receive a medium to long term investment horizon, in case the business may go into some risks the company may work extra hard to revive it. The firms may, as be a route of providing a solid, flexible capital base in meetings the business’s future growth and development strategies (Skiera, Bermes, & Horn, 2011).

However, some of the major disadvantage also accompany North Star’s offer. Equity funds are very much liquid in nature as the investors cannot sell nor buy their investment when ere they want. In most cases, some of the investors for instance North Star investment group bases its funding on the nature of the company’s financial reports with minimal managerial obligations. This may be a manner of pressuring Ed and Larry to focus in just improving and providing presentable financial reports regardless the route and the efficiency of services provided, poor reports may lead to investor withdrawal (Dong, Hirshleifer, & Teoh, 2012).

Other defects that may affect the general running of Go3D business is the nature of holdings held by North Star Venture which intends to increase its shares of the company from 25% to 40% this will lead to a high rather full control of Go 3D board. This will eventually turn the business decision-making be controlled by North Star Venture. From a study conducted by (Sebehela, 2015) its stated that investors need not to have a share of more than 30% under any form of circumstances as chances are that for the future development of the business can be controlled with the highest share holder hence the business owners having little rather no power over their entities.

 

Toyota offer

Toyota Offer has also been the best offer provided by the investors with an offer of providing 2000 m dollars with a share of 15 %, which will help the business entity, meet its progress obligations in expanding its marketing territories. However, (Dong, Hirshleifer, & Teoh, 2012) argues that that if the new venture (in this case Go3D) is a complement to the asset of the strategic investor (Toyota), then the Toyota is highly possible to finance Go3D. Under Go3d’s strategies and objectives it has the visualization products and successful visual showrooms experiences that is required by the Toyota investment group. Toyota being a vehicle producing company may has well provide a good platform for the business to showcase its products and gain much acceptance around the Toyota buyers and the Toyota company as well as a desire from the strong Toyota competitors.

In comparison to the North Star, Toyota’s advantages they tend to be of more important to Go3D in improving its objectives. Its finances are less cheap in comparison to North stars. The offer as well is involved with much advice and provision of decision-making services on the business entity. In addition, its wide sell of its product will provide an opportunity for Go 3D to have a wide market for its products (Lewis & Tan, 2016).

However, Sebehela (2015) states that, equity funding is accompanied by its cons. In circumstances in which the investor’s products are, the major stakeholders within the business it may wish to control each activity within itself. Being a prospect venture and Toyota being the major targeted organization as its product are the major stakeholders it may wish to have total rather a larger control of the business and being a strong competitor of other vehicle industries/firms such as Volkswagen. It may refuse to sign some of the fund or deals that may benefit the business entity with an objective to reduce other competitors from achieving the products and have a higher part of upstaging them this may limit Go 3D from accessing other firms for their product or revenging any extra funding from such firms.

By that time, Edward and Larry own 50%, North Star owns 25%, Toyota owns 15% and the uncle owns 15%. Because both Toyota and North Star demand a high return on their investment, they might persuade the uncle to join their side to argue against Edward and Larry. This is so that it would be 50% against 50%, the decision to largely or only develops education field and get a steady return might not be able to proceed successfully which is definitely not what two entrepreneurs want.

ANE offer

Angel’s North East company, owned by BA, angel investment, has a potentiality of holding the company’s board position by an investment that is offered by probably almost 30 members or less as the investors are expected to be either 30 or less 30 as the best who may wish to invest in the company. On the other hand, the firm’s involvement in the business aid the capital fund and valuation is uncertain. Hence it provides a better option has the board will always strive towards achieving the best results as they will always strive and have objectives towards profit marking (Masulis, Pham, & Zein, 2011). A 30 member’s individual can have the ability to provide quality board of members in running the welfares of the business in relation to other financials who only provide financial support with no managerial obligations. The nature of involvement of the ANE within the management board creates a form of certain it on the quality and the prospect the members may provide on the business entity. The right business angels and venture capitalists can add valuable contacts, skills and experiences within the business. This can be well observed through its connectivity within most of the universities, which will be part of the best way of marketing and increasing its sales in an effective manner. Their involvement will as well be part of assisting with strategy and key decision-making. The ability to be involved in management boards is ability of preparing in providing follow-ups as the business grows (Masulis, Pham, & Zein, 2011).

Although ANE’s involvement in the business funding as well possess some challenges such as the ability and commands of occupying board positions within the business. This may sometimes interfere with the normal business operations of the company. Ed and Larry being the major stakeholders with the future prospect of their company ,the involvement of the ANE may hinder them from making concrete decision as per their demands and observation and fulfilling future goals later may be forced to cope with the requirements of the board members of which mostly occupied with the ANE investment group.

QUESTION 4.

How to cash out Go 3D

Business continuity greatly depends on the ability of the managerial members to effect define the major objectives and goals of the entity. Well-defined objectives and goals provide the required framework that will help the management board develop the required regulation and policies that are focused towards increasing the organization’s continuity (Ivashina & Kovner, 2011). In this case, Edward and Larry being the initial major shareholders of the company they have a greater hand in contributing to its continuity with the initial objectives. For instance in the case it my allow a fully control by the Toyota firm it will greatly reduce its sell products to its major ventures and limit any wide access by the major stakeholder or may highly increase the market prices that will scare most of its competitors.

On the other hand , cashing out may not stand out to be best option as the organization as well plays a major role in helping them on the realistic prospects of developing one’s own software (Skiera, Bermes, & Horn, 2011). In order to have a fully ability of accessing a wide market of their not yet produced or developed software the involvement within the Go3D will of help in future as they develop their products as this would the best platform of showcasing there products and services.

The best form of exit from an active involvement within the company’s managerial obligations after involving ANE is through partial cashing out the company. As observed by Tony’s mail of requesting to have a negotiating and there interest in investing in their company provides more opportunities not only to the company but also to them. As stated the member involvement within the Tony’s mail is 30 although not everybody may agree but as from the statement, most of the members will have an interest in investing in Go 3D company thus the company has the ability of receiving the required expertise in propelling its objectives and the ability to expand its territories. In comparison to Toyota, which may take charge in eliminating some competitor access, ANE with a major objective of increasing its profits background tend to increase its sells t each vehicle company (Feng, Wang, & Huang, 2015).

On the other hand, Edward and Larry’s partial involvement within the company will be beneficial in relation to the plans of diverting to their personal desires. The company being cashed out would automatically possess high-qualified personnel in terms of software due to its diversity of members within the Ares of specification as well as its wide market due to its connectivity within the town universities. The expertise will be of a great benefit to both Edward and Larry towards developing their individual dreams through to aid of ANE experts. Thus, they had better decide to partially cash out the company to ANE members to fully receive more and extra advantages such as the expertise nature. In addition, some of the major advantages may be in terms of money. Go 3D company being a well developing with widely being accepted products; involvement of ANE who form the major expertise nature with a wide market connectivity will automatically propel the company towards fulfilling higher profits each period hence recoding more investing and higher development opportunities within itself. Thus their involvement will grantee them a profit share and ability to include their newly developed strives within the newly developed ones. For instance, Larry’s decision to spend time his passion of already existing products will grantee him ready market within the company as well as Edward who would have brought a new technology within the existing one. Hence adding value to the company products and to the general overall increase in sale and wide spread of the company’s market realizing much more profits which may as be beneficial to both of them. Involvement within the company has well provides an opportunity of identifying more software opportunity gabs to be filled.

Best option would be increasing ANE’s shares and increasing the uncle’s shares but have the minimal shares within the company. Under these circumstances, ANE may be provided a 70% share of the company and a 20% share to the uncle and remain with 10% share as just an involvement within the company. This would have grunted them almost a zero involvement in the day to day running the business.

Major assumptions within the Go 3D is the involvement of ANE as the major investor within the company, Larry’s uncle being the next largest shareholder with a minimal share be owned by Edward and Larry. Second, in most occasions the major shareholder tends to formulate the business policies and regulations thus major changes will be implemented once they cash out the business partially. Higher profits as well tend to increase once they cash out the business to ANE regarding it member status and its level of connectivity and in relations to its objectives and goals (Feng, Wang, & Huang, 2015).

References

Dong, M., Hirshleifer, D., & Teoh, S. H. (2012). Overvalued Equity and Financing Decisions. Review of Financial Studies, 25(12), 3645-3683.

Feng, Z.-Y., Wang, M.-L., & Huang, H.-W. (2015). Equity Financing and Social Responsibility: Further International Evidence. In International Journal of Accounting, 50(3), 45-56.

Ivashina, V., & Kovner, A. (2011). The Private Equity Advantage: Leveraged Buyout Firms and Relationship Banking. Review of Financial Studies, 24(7), 2462-2498.

Lewis, C. M., & Tan, Y. (2016). Debt-equity choices, R&D investment and market timing. In Journal of Financial Economics, 119(3), 599-610.

Masulis, R. W., Pham, P. K., & Zein, J. (2011). Family Business Groups around the World: Financing Advantages, Control Motivations, and Organizational Choices. Review of Financial Studies, 24(11), 3556-3600.

Sebehela, T. (2015). Rationally financing an acquisition. In Journal of Economics and Business, 81(4), 1-20.

Skiera, B., Bermes, M., & Horn, L. (2011). Customer Equity Sustainability Ratio: A New Metric for Assessing a Firm’s Future Orientation. Journal of Marketing, 75(3), 118-131.

Zhang, S. (2016). Institutional arrangements and debt financing. In Research in International Business and Finance, 36(3), 362-372.