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

UK Tax System - Assignment guinea pigProfit margins are small Higher expenditure and lower selling prices forget 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 pull up stakes seriously influence the cash flow In this case, accredit terms should be discussed beforehand with customers and be kept strict so as to make inflows earliest. Key supplier (s) will gradually be dissatisfied If payment problems to suppliers arise due to the expansion or new orders be taken, suppliers will be alarmed and dissatisfied with the corporation. To cure this problem, the community should beforehand discuss the situation with the suppliers and the credit terms should be precisely conveyed so as to prevent future problems. (b) There are a number of short-term finances available to the company to financ e its proposed expansion two of them are discussed as follows Bank Loan, and Bank Overdraft Bank Loan In the case of this company, avow contribute pertains to the short-term extremity usually equal to or less than a year. The verify according to the credit rating lends the company a certain amount of loan needed and on an saki rate negotiated. Strengths Amount will be received on one- term basis and the payment will be done in monthly, quarterly or semi annually installments Cost of borrowing is lower than other means such as Bank Overdraft Interest rates are low Reliability and security is always there in terms of getting the money 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 chanceier the demarcation is, the higher the interest rate the bank will charge to cover up its risk Arrangement fees, as substantially as refund fees, will have to be paid In case of early rep ayment of loan, 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 limit against which a customer or company who has current or checking mark 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 only 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) Capital Gearing Ratio This ratio tells us that how much risk the company is in terms of fina ncial risk and it is used by companies as well as its shareholders to analyse the companys capital structure and leverage (Accounting for Management 2011).