Bbt Case Study

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BBT Case Study BBT Case Study a. i. Define the term copyright Copyright is a legal right concerning intellectual property, such as advertisements, label, graphic design, articles, letters, etc. that gives the monopoly of using it and in this way it protects the producer or the producing company against duplication from its rivals. ii. Identify two disadvantages for BBT of operating as a private limited company. A disadvantage for BBT of operating as a private limited company is that it has not as many finance raising options and it can’t raise as much finance as a public limited company. BBT cannot sell shares to the general public, as a public limited company could have done, in order to have funds to invest in…show more content…
BBT’s net profit before interest and tax as at 31st October 2010 was US$ 27,695. Calculate the value of BBT’s current ratio and return on capital employed (ROCE) Current ratio = Current assetsCurrent liabilities = $30,000$48,000 = 0.625 Return on capital employed – RoCE(%) = Net profitCapital employed×100 = $ 27,695$10,500×100 = 273.76% v. Using financial and non-financial factors explain why the bank manager refused to finance the R&D of the new educational software. BBT doesn’t have enough liquidity to pay its short-term liabilities since its current ratio is only 0.625, meaning that for every $1 of current liabilities the firm has only $0.625 of current assets to cover it. So, there is high risk for the bank manager to give a loan. If he did, he would further increase BBT’s current liabilities, thus causing the current ratio to an even lower level. Moreover, BBT’s total liabilities is $48,000 which is far greater than the $30,000 which is the value of its current assets. Additionally, BBT’s debtors at $28,000 represent 93% of the firm’s value of current assets at $30,000. This may indicate bad debt and means extremely high risk for the bank. Furthermore, software – and educational software is included – has a very short product life cycle, thus there is high possibility that the R&D investment costs may not be recovered. Finally, BBT’s copyright, which is the firm’s unique selling
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