Question

1.You are required to form a business and to write a brief introduction about it (name, services or products, legal form, merchandising or manufacturing, retail or wholesale, size, industry, etc…) -250 words

2. In deciding on the legal form for your business, discuss the reasons for your choice. -250 words

3. Discuss the different financing options to set up your business and the reasons for your choice (s). -250 words

4. Identify the users of accounting information for your business and briefly discuss on how each can use the information.-250 words

5. Assume that the cash flow from operating activities for your business has been negative over the recent years, discuss the various steps that you are likely to take to improve the situation.-250 words

Answer 1

1.The Business We may choose would be ABC Mega Foods.INC, Engaged in Manufacturing of Rice, Legal Form Would be Corporation, Wholesale in Food Industry.

2. We Should Chose it as a Corporation such that Procuring Finance is very easy for companies. Investors always Prefer to Invest in Companies as it gives them easy way of controlling and transferring of shares.

Advantages of a company include that:

• liability for shareholders is limited
• it's easy to transfer ownership by selling shares to another party
• shareholders (often family members) can be employed by the company
• taxation rates can be more favourable
• you'll have access to a wider capital and skills base. .

3. Financing Options may Include Factoring, Bank Loans , Share Capital, through Debentures issue, Crowd Funding, Other Loans etc. But What we prefer is Share Capital such that

One of the attractions of raising capital via the sale of shares is that the company does not have repayment requirements for the initial investment or for interest payments. This can make it more appealing than other forms, such as bank loans and bonds, that are debts of the company. Debts require the company to make payments at regular intervals in relation to interest, as well as eventually repaying the initial amount that was borrowed. Any shares sold can require a distribution of profits as a dividend but these can be halted if necessary. Therefore, the business is given more flexibility over its finances.

Any money raised through the sale of shares can be used by the company however it wants. There are no stipulations or requirements attached to the funds. In comparison a creditor can limit the use of the funds they will lend to the company, which will restrict how the company can use them.

4. We can broadly divide the users of accounting information into two groups – internal users and external users. Internal users include managers and owners of the business whereas external users include investors, creditors of funds, suppliers of goods, government agencies, general public, customers and employees.

Management uses accounting information for evaluating and analyzing organization’s financial performance and position, to take important decisions and appropriate actions to improve the business performance in terms of profitability, financial position and cash flows.

Owners invest capital to start and run business with the primary objective to earn profit. They need accurate financial information to know what they have earned or lost during a particular period of time.

On the basis of this information, Investors decide whether to increase or decrease investment in corporation in future.

Lenders need accounting information to assess the financial performance and position and to have a reasonable assurance that the business to whom they are going to lend money would be able to return the principal amount as well as pay interest there on.

5. It can be improved by some of the steps like

Lease not Buy

Offers Discount on Early Payment

Improving Inventory Check

Sending Invoices Immediately

Using Electronic Modes for payments

and Paying Suppliers Less.