Management Of Working Capital Balance Sheet

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Introduction

Humbro PLC have been successful with their Olympic themed board game, they have decided to take on a business venture of an expansion where they would be able to create a new product which can capitalise on the next football world cup. The finance director has been absent on a long term leave which has led to a lack of clarity and understanding of the various financial options among the other board members within the company. The managing director has asked for some financial advice and if this expansion will go ahead. In this report I will analyse Humbro PLCs financial information give my conclusion followed by my own recommendations for the company and if the expansion is to go ahead.

Users of financial information

Users
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Identified sources of finance in the statement of financial position

Debenture

A debenture is the most common form of long term loan that can be taken by Humbro. Debentures are usually loans that are repayable on a fixed date this is in the statement of financial position under the heading Non-current liabilities (8,000) in both 2011 and 2012. Most debentures pay a fixed rate of interest which you can also see in the statement of financial position under current liabilities titled debenture interest (800) for year 2011 and 2012. The main advantage of a debenture to companies is the fact that they have a lower interest rate than overdrafts. They are usually repayable at a date far off in the future.

Retained earnings

Retained earnings are profits generated by a company that are not distributed to shareholders as dividends but are either reinvested into the business or kept as a reserve for specific objectives these being to pay off debt or purchase a capital asset. As you can see in Humbros statement of financial position under capital and reserves they have retained earnings at 9,100 in 2011 and 10,500 in year 2012 this has shown an increase which means there is more capital available for growth and higher returns on investments and shareholder equity.

Ordinary shares

Ordinary share are any shares
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