UK Tax System Assignment Example | Topics and Well Written Essays - 3250 words

UK Tax System - Assignment ExampleProfit margins are humble Higher expenditure and lower selling prices go forth lead to a lesser bottom-line and so lower dividend payments. This problem can be overcome by working efficiently and effectively to generate high sales and stand up competitively by not lowering the prices of goods. Late payments from customers will naughtily influence the cash flow In this case, trust terms should be discussed beforehand with customers and be kept strict so as to make inflows earliest. differentiate supplier (s) will gradually be dissatisfied If payment problems to suppliers arise due to the expansion or new orders being taken, suppliers will be alarm and dissatisfied with the company. To cure this problem, the company should beforehand discuss the situation with the suppliers and the credit terms should be precisely conveyed so as to prevent future problems. (b) in that respect are a number of short-run finances available to the company to financ e its proposed expansion two of them are discussed as follows patois Loan, and Bank Overdraft Bank Loan In the case of this company, bank loan pertains to the short-term period usually equal to or less than a year. The bank according to the credit rating lends the company a certain amount of loan needed and on an interest rate negotiated. Strengths Amount will be received on one-time basis and the payment will be done in monthly, quarterly or semi annually installments Cost of borrowing is lower than other instrument such as Bank Overdraft Interest rates are low Reliability and security is always there in terms of getting the gold from the bank on time and for a certain period of time contracted upon with the bank Weaknesses The loan will be secured against the companys assets The riskier the credit line is, the higher the interest rate the bank will charge to cover up its risk Arrangement fees, as well up as repayment fees, will have to be paid In case of early repayment of lo an, an extra charge will have to be paid Bank Overdraft It is a kind of loan arrangement under which a bank extends credit allotted to a company up to a maximum amount called the overdraft gear up against which a customer or company who has current or checking account with the bank can write checks or make withdrawals (Business Dictionary 2011). Strengths Appropriate for short-term financing Not secured against any asset of the company so the process of obtaining the loan Is expedited Only charged for the amount overdrawn from the bank account and also pertaining still to the period of time the overdraft facility had been used by the company Weaknesses The bank overdraft amount has to be paid on demand of the bank. This puts the company at a great risk in the case when the bank decides to request the money back at an inconvenient time for the business High-interest rate is charged (c) jacket crown Gearing Ratio This ratio tells us that how much risk the company is in terms of fin ancial risk and it is used by companies as well as its shareholders to analyze the companys capital structure and leverage (Accounting for Management 2011).