ASSIGNMENT

Assignment



Assignment

Essay Questions

Solution 1 (a)

The business of John Mathews and Peter Straw is facing serious working capital management issues due to the fact that it is plunged into debts. However, as stated, the firm is already earning well even though it is facing some performance issues regarding the working capital management, debt management as well as proper documentation of the partnership and legal aspects of running the business.

The two possible alternatives that are available to John Mathews and Peter Straw in the current situation are improving the debt management of the firm and to establish itself as a competent firm in the services it deals in to secure a prosperous organizational performance in the future. However, both these tasks require a lot of planning and decision making, which obviously is not an easy, and John Mathews and Peter Straw would need external help especially from George and Sarah. It is definitely possible to limit the firm's liability in future provided that proper documentation is done to incorporate any possible changes to the partnership and other legal aspects of the firm.

The advantages of allowing George and Sarah to be a part of the partnership of the firm is that the organization will be able to work efficiently by the help of Sarah who is excellent at her work, and George's capital induction will rid John Mathews and Peter Straw off the current working capital issues. Apart from that, George also plans to invest further more next year, which will secure the subsequent year. On the other hand, the only possible disadvantage to John Mathews and Peter Straw would be that their shares in the profits would be divided.

Solution 1 (b)

George and Sarah should be incorporated in the new organization as the benefits that will earn John Mathews and Peter Straw is immense. Apart from that, the incorporation of George and Sarah will yield much better production quality as well as ensure a strengthened capital structure. The basic necessary documentation would include the establishment of a proper partnership agreement between the four partners mentioning all possible necessary details.

The capital structure that could be considered ideal for this organization would be to keep debts much lower than the equity composition. Even though the partners' total equity, before incorporating George and Sarah, totals £40,000 as John had taken back £30,000 it should keep its debts well below the total equity. This will ensure that the organization is not overburdened by debts. Thus, the ideal capital structure would be 60:40 with 60% being equity.

Solution 1 (c)

John Mathews and Peter Straw should produce the following produce as an initial submission as a prospectus to George.

Corporate Strategy

John Mathews and Peter Straws have to establish a proper corporate strategy that is aimed at efficient organizational performance. The corporate strategy will focus on the increased competency of operational side of the business.

Business Plan

The business plan is the basis of the idea as to how the business will be run in the near ...