Question

In: Accounting

Adidias Inc is a start up company and is gradually groeing big and doing well.It needs...

Adidias Inc is a start up company and is gradually groeing big and doing well.It needs additional capital.Imagine yourself as the CEO of Adidas and answer the following questions:

1. How do you plan to raise 10 BN dollar for this company.

2. Draw up the liability section of this imaginary Balance Sheet .(please format in vertical format)

Solutions

Expert Solution

1. Follwing are ways to raise to additional capital

1. Borrowing from Banks

            When a firm has a record of at least earning significant revenues, and better still of earning profits, the firm can make a credible promise to pay interest, and so it becomes possible for the firm to borrow money. Firms have two main methods of borrowing: banks and bonds.

A bank loan for a firm works in much the same way as a loan for an individual who is buying a car or a house. The firm borrows an amount of money and then promises to repay it, including some rate of interest, over a predetermined period of time. If the firm fails to make its loan payments, the bank (or banks) can often take the firm to court and require it to sell its buildings or equipment to make the loan payments.

2. By Issue of Bonds

A large company, for example, might issue bonds for $10 million; the firm promises to make interest payments at an annual rate of 8%, or $800,000 per year and then, after 10 years, will repay the $10 million it originally borrowed. When a firm issues bonds, the total amount that is borrowed is divided up. A firm seeks to borrow $50 million by issuing bonds, might actually issue 10,000 bonds of $5,000 each. In this way, an individual investor could, in effect, loan the firm $5,000, or any multiple of that amount. Anyone who owns a bond and receives the interest payments is called a bondholder. If a firm issues bonds and fails to make the promised interest payments, the bondholders can take the firm to court and require it to pay, even if the firm needs to raise the money by selling buildings or equipment. However, there is no guarantee the firm will have sufficient assets to pay off the bonds. The bondholders may get back only a portion of what they loaned the firm.

3. By issue of Stock ( Shares)

A corp First, a firm receives money from the sale of its stock only when the company sells its own stock to the public (the public includes individuals, mutual funds, insurance companies, and pension funds). A firm’s first sale of stock to the public is called an initial public offering (IPO). The IPO is important for two reasons. For one, the IPO, and any stock issued thereafter, such as stock held as treasury stock (shares that a company keeps in their own treasury) or new stock issued later as a secondary offering, provides the funds to repay the early-stage investors, like the angel investors and the venture capital firms. A venture capital firm may have a 40% ownership in the firm. When the firm sells stock, the venture capital firm sells its part ownership of the firm to the public. A second reason for the importance of the IPO is that it provides the established company with financial capital for a substantial expansion of its operations.

oration is a business that “incorporates”—that is owned by shareholders that have limited liability for the debt of the company but share in its profits (and losses). Corporations may be private or public, and may or may not have stock that is publicly traded. They may raise funds to finance their operations or new investments by raising capital through the sale of stock or the issuance of bonds.

4.Commercial paper

Commercial paper is a commonly used type of unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities. Maturities on commercial paper typically last several days, and rarely range longer than 270 days. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates.

Balncesheet of Addidas as on the day of xx-xx-xxxx

Liabilityes and share holders Equity

Current liabilities
   Account payables XXX XXX
other non current liabilities XXX XXX
Deffred revenvue XXX XXX
Commerical Paper XXX XXX

Non Current laibilties
Term debt XXX XXX
other non current liabilities XXX XXX

Shreholders Equity
Share capital XXX XXX
Reatined Earnings XXX XXX
  

           


Related Solutions

Adidas Inc is a start up company and is gradually growing big and doing well.It needs...
Adidas Inc is a start up company and is gradually growing big and doing well.It needs additional capital.Imagine yourself as the CEO of Adidas and answer the following questions: 1. How do you plan to raise 10 Billion dollar for this company. 2. Draw up the liability section of this imaginary Balance Sheet .(please format in vertical format)
Marcus Company, is a successful start up business, but needs additional funding of $500,000 to fund...
Marcus Company, is a successful start up business, but needs additional funding of $500,000 to fund continued growth. Currently the company is worth $1,500,000.   An angel investor is willing to invest the full $1,500,000. The owner of the company currently owns all 100,000 shares in her business a. Calculate the fair price per share b. How many additional shares must be sold to the angel investor? c. What proportion of the company will the angel investor own? d. What are...
You are doing research on Paranoid Corp (PC).PC is a young,start up company. Currently, PC’s...
You are doing research on Paranoid Corp (PC).PC is a young, start up company. Currently, PC’s cost of goods sold is 95% of their sales (so they have a 5% gross margin). PC is expected to grow rapidly and they will not need a lot of capital investment to fuel that growth. Given their low margin, most analysts believe that PC is overvalued but there is one analyst who thinks that PC is undervalued and has a much higher target...
Recently Johnson & Johnson, a big research-based pharmaceutical company, signs a contract with Moderna, a start-up...
Recently Johnson & Johnson, a big research-based pharmaceutical company, signs a contract with Moderna, a start-up biotech company, and 1. promises to Grant Moderna the exclusive rights to use Johnson & Johnson’s Technology Q for the life of its patent. This license gives Moderna the exclusive right to market, distribute, and manufacture Vaccine Q19 as developed using Technology Q. Johnson & Johnson views the patent as functional intellectual property. 2. Assign two full-time employees to perform research and development work...
Metallica Bearings, Inc. is a young start-up company. The current gearing ratio of the company is...
Metallica Bearings, Inc. is a young start-up company. The current gearing ratio of the company is 35%, and Fitch rated the bonds issued by Metallica Bearings as BB with a face vale of £1,000 per bond. The company has £1.5m of ordinary 50 pence stocks in issue. For following five years, the UK spot rates are estimated as follows: ??1 = 0.50%, ??2 = 0.65%, ??3 = 0.70%, ??4 = 0.75%, ??5 = 1.00%. Required: a) Discuss the differences between...
Metallica Bearings, Inc., is a young start-up company. Nodividends will be paid on the stock...
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $17 per share 10 years from today and will increase the dividend by 3.9 percent per year thereafter. If the required return on this stock is 12.5 percent, what is the current share price? (Do not round intermediate calculations and...
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years, because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $12 per share in 10 years and will increase the dividend by 6 percent per year thereafter. If the required return on this stock is 11 percent, what is the current share price?
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years, because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $10 per share exactly 10 years from today and will increase the dividend by 6 percent per year thereafter. If the required return on this stock is 10 percent, what is the current share price? (Do not round intermediate calculations...
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $12 per share dividend 10 years from today and will increase the dividend by 4 percent per year thereafter. If the required return on this stock is 13 percent, what is the current share price?
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock...
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $15 per share 10 years from today and will increase the dividend by 5 percent per year thereafter. If the required return on this stock is 10.5 percent, what is the current share price?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT