Corporate Accounting

Corporate Accounting

Introduction

The paper aims at assessing different corporate accounting approaches in the given scenario. In the part A, the paper sheds light on the positive and negative sides of available alternatives to expand business operations. In the part B, the paper journalizes the events of IPO offering in combination with identifying other options to deal with excess demand. Finally, the paper provides conclusion on the overall understanding of the subject matter.

Part A - Fundraising Alternatives for Johnsons P/L

In the present scenario, Johnsons P/L is in the need to raise funds of amount $ 60m in order to finance its business expansion decision. In accord with the level of capital required to finance the business expansion, the firm can choose among the following four alternatives of fundraising. However, the firm must assess positive and negative aspects of each listed option with other important considerations in order to make a sound strategic decision:

Equity Financing

At present, Johnsons P/L is seeking a viable option to raise $ 60m for to meet the forecasted increase in their product demand. The firm can meet this objective by reaching out for private investors, who can provide the firm with needed funds in exchange of a certain share in the business ownership (Donovan, 2013). It is a weighable option with considerable benefits to the firm. Firstly, equity financing is the most viable option in case of worst business scenario. For instance, the firm raises funds to meet the demand; however, the firm fails in doing so and generates business losses. In such peril circumstances, equity financing would not require the firm to payback the raised amount of funds. Hence, equity financing meets organizational objective irrespective of any legal and regulatory obligation of mandatory recovery (Donovan, 2013). In addition to this, equity financing smoothens the way for fundraising in the near future by keeping debt to equity ratio to a lower scale. Besides this, equity financing can benefit the firm by making new investors full partner to business liabilities and assumed risks; hence, it creates a feasible option to raise desired level of funds with less risk (NFIB, 2013).

Contrary to this, equity financing can be costly to the business if not managed properly. Excessive reliance on equity financing can result in reduced management control over its business operations and decision making (NFIB, 2013). In addition to this, approval of big and strategic decisions will be tied to the consent and prior acknowledgement of the private investor. For short term purposes, equity financing might not provide a logical choice of fundraising. The firm should also consider the fact that equity financing will ask it to share business profit with private investors, which will close the window of opportunity for retained earnings (Donovan, 2013).

Peer-to-Peer Lending (P2P)

P2P or social lending is a cost effective alternative to meet the fundraising need of $ 60m. P2P lending will provide an easy and relatively convenient way to access funds in the absence of the third party interference (Money Supermarket, ...