The Viability Of The Joint Venture

2265 Words10 Pages
Introduction After the recent financial crisis in 2008, it is becoming essential for the owners of businesses’ to be aware of every financial decision they make in order to ensure that they can maximise the profitability of any current or future ventures. The aim of this report is to determine the viability of the joint venture that has been proposed and to also offer advice on how to improve the current business in order to maximise Edit 4Us’ profitability. This report presents the key issues surrounding both ventures and gives recommendations as to how to try and combat these issues. Finally a conclusion will be reached about the viability of the joint venture and various proposals will be offered as to how E4U can improve their…show more content…
By referring to appendix part a, it shows a loss will be made and a large amount of bad debts will have been created. Therefore before any decision is made, the client should acquire the exact figures of the future revenues and expenses of the firm. Once the appropriate information has been collected and analysed, different forms of investment appraisal can be conducted. Here the client will be able to assess the viability of the investment proposal. There a number of different methods that can be used to do this. They include the; internal rate of return, net present value and payback period of the proposal (Horngren et al, 2012). These methods will assist the client in deciding if they should accept or reject the project. In regards to the purchase of new equipment and the leasing of new property, the client should refrain from participating in these activities. As the venture appears to be surrounded by uncertainty, the client risks running up a large amount of debt that could have severe consequences in the future. My advice to the client would be to return the new equipment and to negotiate a way out of the two year lease. The client should do this until they are completely confident about the success of the venture. Before the client decides to invest in the proposed venture they must first address a number of issues. This includes becoming more informed about their potential partner and also in gathering
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