1.physical resources (2005.6) (1)

BTEC HIGHER NATIONALSBTEC HIGHER NATIONALS
MOTOR VEHICLE MOTOR VEHICLE
MANAGEMENT AND MANAGEMENT AND
TECHNOLOGYTECHNOLOGY

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 22
IntroductionsIntroductions
Name
Job
Experience
Other Interests etc

UNIT 2:UNIT 2:
MANAGING RESOURCESMANAGING RESOURCES

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 44
Managing Resources: learning Managing Resources: learning
outcomesoutcomes
IInvestigate the use of nvestigate the use of Physical ResourcesPhysical Resources
Critical Factors Critical Factors affecting selection and useaffecting selection and use
Planning, Monitor & ControlPlanning, Monitor & Control of physical of physical
resourcesresources

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 55
What is the importance of good What is the importance of good
management?management?
Show video presentation Show video presentation
Soap Opera Soap Opera
With Gerry Robinson

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 66

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 77
Activity Activity
Using a paper sheet develop a left and right Using a paper sheet develop a left and right
column of good vs. bad traits of a manager.column of good vs. bad traits of a manager.
Say 10 minutes?Say 10 minutes?
We will then discussWe will then discuss

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 88
Strategic or Operational?Strategic or Operational?
From your key points let us decide where they fit From your key points let us decide where they fit
within the following?within the following?
Operational controlOperational control
Managerial controlManagerial control
Strategic planningStrategic planning

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 99
Operational controlOperational control
Routine programmed actionsRoutine programmed actions
Closed systems requiring a performance to be Closed systems requiring a performance to be
measurablemeasurable
Information available to aid control Information available to aid control
Short termShort term

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 1010
Managerial controlManagerial control
Regular but more formal and central to policy Regular but more formal and central to policy
Information less available decision-making Information less available decision-making
more central to forecastingmore central to forecasting
Perspective is one of business units as opposed Perspective is one of business units as opposed
to departmentsto departments
Medium-termMedium-term

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 1111
Strategic planningStrategic planning
Irregular and non-routineIrregular and non-routine
Little proven or evaluated market information Little proven or evaluated market information
availableavailable
Open decision-making systems (no effective Open decision-making systems (no effective
data response)data response)
No effective data availableNo effective data available
Longer-termLonger-term

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 1212
Management theoriesManagement theories
Classical to scientific managementClassical to scientific management
Frederick Winslow Taylor
(1856-1915) Henry Ford (1863-1947)
Henri Fayol 1841-1925

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 1313
Classical Management: a brief Classical Management: a brief
Introduction Introduction
Born into a wealthy Philadelphia Quaker family in Born into a wealthy Philadelphia Quaker family in
1856, Taylor became an apprentice machinist in a 1856, Taylor became an apprentice machinist in a
firm of engineers before joining the Midvale Steel firm of engineers before joining the Midvale Steel
Company in 1878, where he developed his scientific Company in 1878, where he developed his scientific
management ideas. management ideas.
The company manufactured locomotive wheels and The company manufactured locomotive wheels and
axles, and it was here that he rose to the position of axles, and it was here that he rose to the position of
shop superintendent by 1887. In this role, he shop superintendent by 1887. In this role, he
observed that workers used different, and mostly observed that workers used different, and mostly
inefficient, work methods. He also noticed that few inefficient, work methods. He also noticed that few
machinists ever worked at the speed of which they machinists ever worked at the speed of which they
were capable, a practice that he labelled systematic were capable, a practice that he labelled systematic
soldiering. soldiering.
Frederick Winslow Taylor
(1856-1915)

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 1414
TaylorismTaylorism
Taylor perceived workforces’ operations as Taylor perceived workforces’ operations as ‘systematic ‘systematic
soldiering’ soldiering’ and attributed this tendency to deliberately avoid and attributed this tendency to deliberately avoid
hard work for the following main reasons:hard work for the following main reasons:
The view among the workers that an increase in output would The view among the workers that an increase in output would
result in redundancies. result in redundancies.
Poor management controls, which made it easy for them to work Poor management controls, which made it easy for them to work
slowly in order to protect their own best interests. slowly in order to protect their own best interests.
The choice of methods of work, which was left entirely to the The choice of methods of work, which was left entirely to the
discretion of the workers, who wasted a large part of their discretion of the workers, who wasted a large part of their
efforts using inefficient and untested rules of thumb. efforts using inefficient and untested rules of thumb.
As a result Taylor developed ‘Scientific Management’ to As a result Taylor developed ‘Scientific Management’ to
overcome this – overcome this – Standardization.Standardization. The System not The ManThe System not The Man

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 1515
Henry FordHenry Ford
By 1920, the name of Henry Ford By 1920, the name of Henry Ford
had became synonymous not only had became synonymous not only
with his Model T motor car but also with his Model T motor car but also
with his revolutionary techniques of with his revolutionary techniques of
mass production. Ford established his mass production. Ford established his
company in 1903. In the 1890s, it company in 1903. In the 1890s, it
was skilled craftsmen who built was skilled craftsmen who built
motor cars. Ford claimed that there motor cars. Ford claimed that there
were not enough of them to meet the were not enough of them to meet the
level of car production that he level of car production that he
wanted, and that was why, in his wanted, and that was why, in his
view, deskilling of work was view, deskilling of work was
necessary. necessary.
Henry Ford (1863-1947)

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 1616
FordismFordism
Ford's goal was 'continuous improvement' rather than Ford's goal was 'continuous improvement' rather than
the 'one best way'. the 'one best way'.
Ford's objective was to increase his control by Ford's objective was to increase his control by
eliminating uncertainty (Ford and Crowther, 1924). eliminating uncertainty (Ford and Crowther, 1924).
Among his major innovations were: Among his major innovations were:
Analysis of jobs using time-and-motion techniques; Analysis of jobs using time-and-motion techniques;
Installation of single-purpose machine tools to Installation of single-purpose machine tools to
manufacture standardized parts; manufacture standardized parts;
Introduction of the assembly line. Introduction of the assembly line.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 1717
Henri FayolHenri Fayol
Fayol's list of managerial activities Fayol's list of managerial activities
provides a definition of management. provides a definition of management.
He is credited with 'inventing' He is credited with 'inventing'
management, as a discrete activity, and management, as a discrete activity, and
defining its constituent elements. defining its constituent elements.
Interestingly, the word Interestingly, the word management management is is
not translatable into all languages, nor not translatable into all languages, nor
does the concept exist in all cultures. does the concept exist in all cultures.
Managing of course occurs, but it is not Managing of course occurs, but it is not
always treated as anything special or always treated as anything special or
separate. separate.
Henri Fayol 1841-1925)

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 1818
Henri FayolHenri Fayol
He stressed methods rather than personalities, He stressed methods rather than personalities,
seeking to present the former in a coherent and seeking to present the former in a coherent and
relevant scheme. This formed his theory of relevant scheme. This formed his theory of
organization. Unlike Taylor, Fayol focused on organization. Unlike Taylor, Fayol focused on
the top of the hierarchy and moved downwards. the top of the hierarchy and moved downwards.
However, like Taylor, he too believed that a However, like Taylor, he too believed that a
manager's work could be reviewed objectively, manager's work could be reviewed objectively,
analysed and treated as a technical process which analysed and treated as a technical process which
was subject to certain definite principles which was subject to certain definite principles which
could be taught. Fayol's list of six management could be taught. Fayol's list of six management
activities, originally developed some 80 years activities, originally developed some 80 years
ago, remain broadly intact to this day ago, remain broadly intact to this day
Henri Fayol
1841-1925)

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 1919
Henri Fayol – Classical Management Henri Fayol – Classical Management
TheoryTheory
Henri Fayol: Engineer and Management Theorist Henri Fayol: Engineer and Management Theorist
identified six principal business operational identified six principal business operational
categories found within a typical organization: categories found within a typical organization:
• TechnicalTechnical
• CommercialCommercial
• FinancialFinancial
• SecuritySecurity
• AccountingAccounting
• Management. Management.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 2020
Henri Fayol – Classical Management Henri Fayol – Classical Management
TheoryTheory
Henri Fayol identified six Henri Fayol identified six ManagementManagement activities: activities:
• ForecastingForecasting – predictions of future events – predictions of future events
• PlanningPlanning – develop action to meet demand – develop action to meet demand
• OrganizingOrganizing – combination of all resources and – combination of all resources and
the allocation of responsibilities for department the allocation of responsibilities for department
and individualand individual
• CommandingCommanding – the directing of human resources – the directing of human resources
• Co-ordinatingCo-ordinating – synthesizing the efforts – synthesizing the efforts
• ControllingControlling – monitor of progress against plans – monitor of progress against plans
and implementing corrective actions when and implementing corrective actions when
appropriateappropriate

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 2121
Fayol’s general principlesFayol’s general principles
•Division of labourDivision of labour
•AuthorityAuthority
•DisciplineDiscipline
•Unity in commandUnity in command
•Scalar principles (line of authority)Scalar principles (line of authority)
•Unity in directionUnity in direction
•Individual interest; subordinationIndividual interest; subordination
•RemunerationRemuneration
•CentralizationCentralization
•OrderOrder
•Equity in treatmentEquity in treatment
•Employment stabilityEmployment stability
•Initiative opportunityInitiative opportunity
•Espirit de corps – Espirit de corps – (promotion of team spirit and effort)(promotion of team spirit and effort)

OUTCOME 1OUTCOME 1
Investigate the use of physical Investigate the use of physical
resourcesresources

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 2323
Investigate the use of physical Investigate the use of physical
resourcesresources
Assess and report the utilisation of different Assess and report the utilisation of different
physical resourcesphysical resources
Describe the critical factors which affect the Describe the critical factors which affect the
selection and use of physical resourcesselection and use of physical resources
Produce recommendations for selection and Produce recommendations for selection and
use of physical resourcesuse of physical resources
Explain the processes for investigating and Explain the processes for investigating and
recommending the use of physical resources.recommending the use of physical resources.

1 Physical Resources Within 1 Physical Resources Within
Planning, Control and MonitorPlanning, Control and Monitor
Critical Factors Influencing the Critical Factors Influencing the
Selection of Physical ResourcesSelection of Physical Resources

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 2525
1.1.1.Planning Categories 1.1.1.Planning Categories
Planning is a management function, which is Planning is a management function, which is
intended to appraise specific courses of action or intended to appraise specific courses of action or
activities in pursuit of the organization’s aim. The activities in pursuit of the organization’s aim. The
layers of planning align to the managerial layers of planning align to the managerial
divisions within an organizational structure, but divisions within an organizational structure, but
broadly fall into the following categories:broadly fall into the following categories:
► ► Corporate longer-term planning.Corporate longer-term planning.
► ► Operational budgetary planning.Operational budgetary planning.
► ► Tactical or divisional medium, short-term Tactical or divisional medium, short-term
planning.planning.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 2626
1.1.1.Planning Categories1.1.1.Planning Categories
The corporate and operational planning provides The corporate and operational planning provides
to a greater extent the strategic planning for to a greater extent the strategic planning for
the organization. the organization.
This deals chiefly with the development and life This deals chiefly with the development and life
of the company and its operating aims. of the company and its operating aims.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 2727
1.2. Critical factors1.2. Critical factors
The Divisional and tactical planning is the action of The Divisional and tactical planning is the action of
developing, implementing, monitoring and developing, implementing, monitoring and
controlling specific departmental objectives by controlling specific departmental objectives by
departmental management, in order to achieve the departmental management, in order to achieve the
strategic aims. strategic aims.
The reality of drawing up plans will incur many The reality of drawing up plans will incur many
obstacles and difficulties that the management will be obstacles and difficulties that the management will be
required to overcome. required to overcome.
These critical factors are considered as measures of These critical factors are considered as measures of
resource within the performance forecasting: a resource within the performance forecasting: a
component of the planning process.component of the planning process.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 2828
1.2. Critical Factors1.2. Critical Factors
The principal resource within an organization is The principal resource within an organization is
its human resource; its people: this its human resource; its people: this
organizational topic is dealt with within organizational topic is dealt with within
sections 3 and 4. sections 3 and 4.
The focus of this section will be the The focus of this section will be the
understanding of physical resources and how understanding of physical resources and how
to assess their value within the planning and to assess their value within the planning and
monitor process.monitor process.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 2929
1.2. Critical factors1.2. Critical factors
Forecasting concerns the probability of future Forecasting concerns the probability of future
events or trends occurring, which will directly events or trends occurring, which will directly
or indirectly influence the business, either as or indirectly influence the business, either as
an opportunity or threat. From this the an opportunity or threat. From this the
management plan will attempt to turn their management plan will attempt to turn their
resources into a strength in dealing with the resources into a strength in dealing with the
opportunity as opposed to a threat.opportunity as opposed to a threat.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 3030
1.2.1.Financial Constraints:1.2.1.Financial Constraints:
The financial health of an organization and its The financial health of an organization and its
business is paramount. The basic needs for any business is paramount. The basic needs for any
motor retail business’ financial structure is: motor retail business’ financial structure is:
provision of working capital; the increase in provision of working capital; the increase in
capital wealth and the cost effective utilization capital wealth and the cost effective utilization
of funds, capital and assets. of funds, capital and assets.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 3131
1.2.1.Financial Constraints:1.2.1.Financial Constraints:
Essentially the responsibility of financial Essentially the responsibility of financial
structure is the domain of the proprietor or structure is the domain of the proprietor or
board of directors and finance advisor. board of directors and finance advisor.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 3232
1.2.1.Financial Constraints1.2.1.Financial Constraints::
The accepted method of financial control is The accepted method of financial control is
through the budgeting system, where a master through the budgeting system, where a master
budget is devised of which each department budget is devised of which each department
whether cost or revenue focused is linked as a whether cost or revenue focused is linked as a
component part. component part. Diagram 1.1.Diagram 1.1.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 3333
1.2.1.Financial Constraints:1.2.1.Financial Constraints:
Financial directive from
proprietor or board of
directors
Business Plan and
Operational
objectives set for the
budgeted financial
year.
Expressed as a
Master Budget
Departmental budget
Department/Divisional
plan and
forecast
Requirements:
Labour
Skill
Training
Equipment
Vehicles
IT
Marketing
Requirements:
Buildings
Services
Stock
Capital fixtures
Investment
Growth
Profit
Diagram 1.1

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 3434
1.2.1.Financial Constraints:1.2.1.Financial Constraints:
The departmental budget places the financial The departmental budget places the financial
constraints, effectively the spending capability constraints, effectively the spending capability
upon the department. upon the department.
Within the budget process will be an element of Within the budget process will be an element of
flexibility and it is within this area that a flexibility and it is within this area that a
manager has the opportunity to develop a manager has the opportunity to develop a
business case to support a particular business business case to support a particular business
venture that they believe will grow the venture that they believe will grow the
profitability of the business.profitability of the business.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 3535
1.2.2. Competition and Demand:1.2.2. Competition and Demand:
Within the business plan an appropriate assessment Within the business plan an appropriate assessment
of the environment in respect of demand by the of the environment in respect of demand by the
population, and the competition to supply the population, and the competition to supply the
service aligned to your own business. service aligned to your own business.
Detailed information of market area customer spend Detailed information of market area customer spend
power and vehicle utilisation is available from power and vehicle utilisation is available from
National statistics data, specialist agencies and National statistics data, specialist agencies and
marketing experts within motor industry marketing experts within motor industry
manufacturers and institute organizations. manufacturers and institute organizations.
However at a minimum a SWOT analysis should be However at a minimum a SWOT analysis should be
undertaken to evaluate current and potential undertaken to evaluate current and potential
business opportunities. business opportunities. Diagram: 1.2.Diagram: 1.2.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 3636
Diagram 1.2Diagram 1.2
Competitor AnalysisCompetitor Analysis
Competition Strengths and weaknesses
Name Location Strength Weakness Opportunities Threats

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 3737
1.2.3. Company and Departmental 1.2.3. Company and Departmental
Objectives: PolicyObjectives: Policy
The company policy will align the department to The company policy will align the department to
its core objectives through the budgetary its core objectives through the budgetary
meeting and agreement processes. meeting and agreement processes.
The setting of objectives at department level to The setting of objectives at department level to
meet these demands will invoke the appraisal meet these demands will invoke the appraisal
of resources available to delivering the of resources available to delivering the
objectives set.objectives set.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 3838
1.2.3. Company and Departmental 1.2.3. Company and Departmental
Objectives: PolicyObjectives: Policy
The department budget will most certainly The department budget will most certainly
reflect seasonal trends and this will be of reflect seasonal trends and this will be of
particular importance to retail operations particular importance to retail operations
within areas of particular public and within areas of particular public and
recreational attraction such as coastal resorts recreational attraction such as coastal resorts
and major route locations.and major route locations.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 3939
1.2.3. Company and Departmental 1.2.3. Company and Departmental
Objectives: PolicyObjectives: Policy
The physical resources: premises, vehicles and The physical resources: premises, vehicles and
equipment in supporting the primary role of an equipment in supporting the primary role of an
After-sales retail business will need to be After-sales retail business will need to be
dependable if the staff are to achieve the best dependable if the staff are to achieve the best
customer service and from which the managers customer service and from which the managers
thus derive the optimum profitability.thus derive the optimum profitability.
Activity:Activity: Discuss effective resource Discuss effective resource
requirements requirements

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 4040
1.2.4. Legal Requirements:1.2.4. Legal Requirements:
This will entail the consideration of maintenance This will entail the consideration of maintenance
agreements with regard to the general agreements with regard to the general
workshop equipment and the essential workshop equipment and the essential
consideration of legislative controls of the consideration of legislative controls of the
following:following:

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 4141
1.2.4. Legal Requirements:1.2.4. Legal Requirements:
Health and Safety legislation. Responsibility of the Health and Safety legislation. Responsibility of the
employer may include the following areas depending on employer may include the following areas depending on
national or EU laws:national or EU laws:
Provide and maintain safe premises , plant and systems Provide and maintain safe premises , plant and systems
of work that are safe and without risk to health or of work that are safe and without risk to health or
safety.safety.
Make provision for the safety and absence of risk to Make provision for the safety and absence of risk to
health in connection with the use, handling, storage and health in connection with the use, handling, storage and
transporting of articles and substancestransporting of articles and substances ( See Risk ( See Risk
Assessment Example in Study Guide)Assessment Example in Study Guide)

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 4242
1.2.4. Legal Requirements:1.2.4. Legal Requirements:
Provide information, instruction, training and Provide information, instruction, training and
supervision to ensure the health and safety of supervision to ensure the health and safety of
all its employeesall its employees
Provide a maintenance and working Provide a maintenance and working
environment which is safe and without risk to environment which is safe and without risk to
health and has adequate facilities and health and has adequate facilities and
arrangements for the welfare of employeesarrangements for the welfare of employees

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 4343
1.2.4. Legal Requirements:1.2.4. Legal Requirements:
Health and Safety at Work extends to include the Health and Safety at Work extends to include the
following main equipment types:following main equipment types:
Vehicle lifts/hoistsVehicle lifts/hoists
 Jacking beams and hydraulic bench liftsJacking beams and hydraulic bench lifts
Axle standsAxle stands

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 4444
1.2.4. Legal Requirements:1.2.4. Legal Requirements:
Cranes and hydraulic hoistsCranes and hydraulic hoists
Chains, chain blocks, slings and other types of Chains, chain blocks, slings and other types of
mechanical lifting tacklemechanical lifting tackle
Air receiversAir receivers
Abrasive wheelsAbrasive wheels
Respiratory systemsRespiratory systems
Accident recovery systems: including: repair, Accident recovery systems: including: repair,
recovery and first-aid equipment recovery and first-aid equipment

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 4545
1.2.5. Performance and Efficiency: 1.2.5. Performance and Efficiency:
At this point we should consider the life and At this point we should consider the life and
obsolescence of equipment and the related obsolescence of equipment and the related
impact of these resources upon the cost of impact of these resources upon the cost of
replacement and incurred burden upon replacement and incurred burden upon
projected revenues and business opportunities.projected revenues and business opportunities.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 4646

1.2.5. Performance and Efficiency:1.2.5. Performance and Efficiency:
Group Activity 1.1 – use a paper sheetGroup Activity 1.1 – use a paper sheet
Working within your groups draw up a SWOT Working within your groups draw up a SWOT
analysis of your own business or a business analysis of your own business or a business
familiar to you specific to competition and familiar to you specific to competition and
demand within your location. demand within your location.
You should consider seasonal influences and You should consider seasonal influences and
physical restrictions that would affect sales physical restrictions that would affect sales
and customer perception.and customer perception.

1 Physical Resources Within 1 Physical Resources Within
Planning, Control and MonitorPlanning, Control and Monitor
The Process of Physical Resource The Process of Physical Resource
Assessment and RecommendationAssessment and Recommendation

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 4848
1.3 Introduction1.3 Introduction
Nigel Slack (2001): identifies medium, short-Nigel Slack (2001): identifies medium, short-
term planning as dealing with planning in term planning as dealing with planning in
detail. detail.
A process of looking ahead in a disaggregated A process of looking ahead in a disaggregated
manner as the medium term plan concentrates manner as the medium term plan concentrates
more greatly toward the shorter term.more greatly toward the shorter term.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 4949
1.3 Introduction1.3 Introduction
This can create a difficult environment from This can create a difficult environment from
which the departmental manager must make which the departmental manager must make
his decisions related to capital expenditure on his decisions related to capital expenditure on
physical resources. Refer Diagram 1.3.physical resources. Refer Diagram 1.3.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 5050
Balance between planning and control Balance between planning and control
activities long to short-term. activities long to short-term. Diagram 1.3 Diagram 1.3
Long-term planning and controlLong-term planning and control
Years/monthsYears/months
Uses aggregate demand forecastsUses aggregate demand forecasts
Determines resources to an aggregate demandDetermines resources to an aggregate demand
Financially biased objectivesFinancially biased objectives
Medium-term planning and controlMedium-term planning and control
Months/weeksMonths/weeks
Uses partially aggregate demand forecastsUses partially aggregate demand forecasts
Determines resources and contingenciesDetermines resources and contingencies
Objectives combine financial and operational Objectives combine financial and operational
concernsconcerns
Short-term planning and controlShort-term planning and control
Days/hoursDays/hours
Uses totally disaggregated forecasts based upon Uses totally disaggregated forecasts based upon
demanddemand
Makes interventions to resources to correct Makes interventions to resources to correct
deviations from planned objectivesdeviations from planned objectives
Spur of the moment Spur of the moment consideration of operational consideration of operational
objectivesobjectives
CONTROL
Years/
months
Months/
weeks
Weeks/
days
Days/
hours
PLANNING

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 5151
1.3.1. Demand1.3.1. Demand
The tactical operating management will be able to The tactical operating management will be able to
identify with the identify with the instant instant demands of their demands of their
environment to take up operating opportunities. environment to take up operating opportunities.
Diagram 1.3 identifies the characteristics of the short Diagram 1.3 identifies the characteristics of the short
term planning and medium term planning, term planning and medium term planning,
specifically 12 months and less. specifically 12 months and less.
At this level managers will be continually balancing At this level managers will be continually balancing
efficiency quality revenue and expenditure in order to efficiency quality revenue and expenditure in order to
control the focus and reduce the negative variance control the focus and reduce the negative variance
from the budget control. from the budget control.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 5252
1.3.1. Demand1.3.1. Demand
Let us consider a potential Let us consider a potential Spur of the moment Spur of the moment
situation. situation.
Consider the group activity conducted relating to Consider the group activity conducted relating to
competitor and environmental SWOT analysis. competitor and environmental SWOT analysis.
Let us now consider that a hypothetical Let us now consider that a hypothetical
opportunity or threat has arisen in the form of opportunity or threat has arisen in the form of
recent planning permission for a new office recent planning permission for a new office
building to house in excess of 3,500 building to house in excess of 3,500
employees whose major commuter route is by employees whose major commuter route is by
road. road.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 5353
1.3.1. Demand1.3.1. Demand
As a Service Manager you have a limited tyre, exhaust As a Service Manager you have a limited tyre, exhaust
and battery fitting facility and rely upon the Parts and battery fitting facility and rely upon the Parts
Department Manager for your supply of stock, most Department Manager for your supply of stock, most
of which is ordered in because the demand for your of which is ordered in because the demand for your
services in this sector is only a small component of services in this sector is only a small component of
your current customer base. your current customer base.
You believe this largely to be because your current You believe this largely to be because your current
customer base, is largely local with a limited spend customer base, is largely local with a limited spend
value in this service sector.value in this service sector.
Additionally as a result of local knowledge you benefit Additionally as a result of local knowledge you benefit
from discounted factor components supplied by a from discounted factor components supplied by a
local tyre specialist.local tyre specialist.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 5454
1.3.1. Demand1.3.1. Demand
You have refrained from investing in new You have refrained from investing in new
equipment centred to this service facility, as equipment centred to this service facility, as
the revenue comes from what you consider to the revenue comes from what you consider to
be an be an Independent Demand Independent Demand situation, where situation, where
planning is very difficult due to fluctuation in planning is very difficult due to fluctuation in
customer demand. customer demand.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 5555
1.3.1. Demand1.3.1. Demand
However within your SWOT analysis you However within your SWOT analysis you
believe you have identified an opportunity to believe you have identified an opportunity to
secure additional service work plus an secure additional service work plus an
opportunity to control and improve tyre and opportunity to control and improve tyre and
ancillary sales as an addition to the service ancillary sales as an addition to the service
work.work.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 5656
1.3.1. Demand1.3.1. Demand
Your decision to consider this opportunity as a Your decision to consider this opportunity as a
Dependent Demand, Dependent Demand, although has risk attached, is although has risk attached, is
profitable as it is centred to the fact that the new office profitable as it is centred to the fact that the new office
block is sited literally within walking distance. block is sited literally within walking distance.
You believe this benefit of location will provide a You believe this benefit of location will provide a
governed demand largely as a result of the outsider governed demand largely as a result of the outsider
employees commuting by car to work. employees commuting by car to work.
In addition, although your main workshop is busy you In addition, although your main workshop is busy you
only measure a 90% efficiency overall for your 10 only measure a 90% efficiency overall for your 10
productive staff and believe that sufficient work from productive staff and believe that sufficient work from
this new opportunity will take up this shortfall in this new opportunity will take up this shortfall in
labour efficiencylabour efficiency

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 5757
Dependent demandDependent demand
The example here shows the demand for tyres in a car plant is dependent
Upon the manufacturer’s production schedule
Slack: 1998

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 5858
Independent demandIndependent demand
Whereas in the example of tyre sales within the Independent model does not
rely on any one single determining factor, but is linked to a whole host of
Similar and different sales alike.
Slack: 1998

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 5959
Group Assignment TasksGroup Assignment Tasks
Prepare tasks 1a and 1b as instructed on your Prepare tasks 1a and 1b as instructed on your
assignment sheetassignment sheet
Time allowed: 2 hoursTime allowed: 2 hours
A final draft of all tasks should be handed A final draft of all tasks should be handed
in by the date specified in your schedulein by the date specified in your schedule

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 6060
Applying Costings to Applying Costings to
Purchase of ResourcesPurchase of Resources
When purchasing equipment or other
resources it is necessary to plan and
project the costs of use over a given
period. This can be done using methods
such as ‘payback period’ (PP) or ‘net
present value’ (NPV)

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 6161
Example Payback Period (PP) and Net Present Example Payback Period (PP) and Net Present
Value (NPV) – using the project valuesValue (NPV) – using the project values
0£22,000 £0 -£22,000
1 £1,500 -£20,500
2 £3,500 -£17,000
3 £5,000 -£12,000
4 £10,000 -£2,000
5 £10,000 £8,000
6 £10,000 £18,000
7 £10,000 £28,000
Payback Period
Project
years
Initial
outlay
Expected
cash inflow
£'s
Revenue
£'s
Using Using PPPP cost benefit analysis cost benefit analysis
the project returns profit the project returns profit
in year 5in year 5
NET PRESENT VALUE (NPV)
Project
years
Initial
outlay
Expected
cash
inflow £'s
Discount factorProjected
value of
cash
inflows £'s
NPV
adjusted
revenue £'s
10%
0£22,000 £0 1 0 -£22,000.00
1 £1,5000.909090909£1,363.64-£20,636.36
2 £3,5000.826446281£2,892.56-£17,743.80
3 £5,0000.751314801£3,756.57-£13,987.23
4 £10,0000.683013455£6,830.13-£7,157.09
5 £10,0000.620921323£6,209.21 -£947.88
6 £10,000 0.56447393£5,644.74£4,696.86
7 £10,0000.513158118£5,131.58£9,828.44
Using NPV cost benefit analysis at
10% discount factor the project
returns profit in year 6

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 6262
NPVNPV

ActivityActivity
28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 6363
PROJECT A B C D
Investment 15k 18k 10k 18k
Year 1 income 7k 6k 5k 4k
Year 2 income 4k 6k 5k 5k
Year 3 income 3k 6k - 6k
Year 4 income 2k 6k - 7k
Year 5 income 1k 6k - 8k
Work out the Net Present Value for each project at the end of its’ life
cycle using a discount factor of 10%

Activity - SolutionActivity - Solution
28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 6464
PROJECT A B C D
Investment 15k 18k 10k 18k
Year 1 - 10%
discounted
6.363k 5.454k 4.545k 3.636k
Year 2 - 10%
discounted
3.304k 4.956k 4.13k 4.13k
Year 3 - 10%
discounted
2.253k 4.506k - 4.506k
Year 4 - 10%
discounted
1.366k 4.098k - 4.781k
Year 5 - 10%
discounted
0.621k 3.726k - 4.968k
Total 13.907k 22.740k 8.675k 22.021k
NPV -1.093k 4.740k -1.325 4.021k

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 6565
Summary Summary
Reflect outcome 1 – PHYSICAL RESOURCESReflect outcome 1 – PHYSICAL RESOURCES
Discuss Discuss

2.Plan, Monitor and Control2.Plan, Monitor and Control
Utilization Factors and Affect Upon Utilization Factors and Affect Upon
Efficiency CriteriaEfficiency Criteria

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 6767
2.1. Introduction2.1. Introduction
The operating department budget should identify The operating department budget should identify
all costs and revenues expected to be incurred all costs and revenues expected to be incurred
and produced. Within the after-sales and produced. Within the after-sales
departments of a retail motor dealer, labour departments of a retail motor dealer, labour
sales play a dominant role within the body, sales play a dominant role within the body,
paint and service department.paint and service department.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 6868
2.1. Introduction2.1. Introduction
Hence labour utilisation is a very important and Hence labour utilisation is a very important and
extensively measured performance of any extensively measured performance of any
workshop. And usually the bigger they are the workshop. And usually the bigger they are the
more complex the measurements get.more complex the measurements get.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 6969
2.1. Utilization Factors:2.1. Utilization Factors:
In planning the utilization of the physical In planning the utilization of the physical
resources modern workshops make use of resources modern workshops make use of
computer software programmes to calculate computer software programmes to calculate
the inter-related efficiency and revenue rates. the inter-related efficiency and revenue rates.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 7070
2.1. Utilization Factors:2.1. Utilization Factors:
Within the motor Industry throughput is Within the motor Industry throughput is
measured on a continual basis with measured measured on a continual basis with measured
analysis occurring on a monthly cycle. It is analysis occurring on a monthly cycle. It is
important to recognise that within the make-up important to recognise that within the make-up
of the budget certain trend and seasonal of the budget certain trend and seasonal
fluctuations may or may not be accounted for. fluctuations may or may not be accounted for.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 7171
2.1. Utilization Factors:2.1. Utilization Factors:
It is imperative that the department manager It is imperative that the department manager
make themselves aware of any particular make themselves aware of any particular
accruals or pre-payments of expenses and any accruals or pre-payments of expenses and any
aggregation of revenues set out by the aggregation of revenues set out by the
accountant in the interest of the company accountant in the interest of the company
policy and master budget. policy and master budget.
The alternative to this is shear frustration!The alternative to this is shear frustration!

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 7272
2.1. Utilization Factors:2.1. Utilization Factors:
The following are the main measures of utilization that The following are the main measures of utilization that
impact upon the measure of efficiency and impact upon the measure of efficiency and
profitability of a department: profitability of a department:
Human resourcesHuman resources
Workshop loading Workshop loading
Available labour hoursAvailable labour hours
Sold hoursSold hours
Attended hoursAttended hours
Bought hours (Including bonuses and overtime)Bought hours (Including bonuses and overtime)
Absences (Lost hours)Absences (Lost hours)

Labour EfficienciesLabour Efficiencies
It is important to not only monitor labour It is important to not only monitor labour
efficiencies, but also to include them in efficiencies, but also to include them in
planning or costing when carrying out planning or costing when carrying out
investment appraisals for physical resourcesinvestment appraisals for physical resources
28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 7373
Labour efficiencies spreadsheet

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 7474
2.1. Utilization Factors:2.1. Utilization Factors:
Physical ResourcesPhysical Resources
► ► Equipment depreciationEquipment depreciation
► ► Company vehicle utilisation costs (Insurance, Tax, Company vehicle utilisation costs (Insurance, Tax,
Road fund licence, Fuels, etc…)Road fund licence, Fuels, etc…)
► ► Company vehicle depreciation costs.Company vehicle depreciation costs.
► ► Recovery vehicle costs (Standing costs).Recovery vehicle costs (Standing costs).
► ► Recovery vehicle downtime (Idle time).Recovery vehicle downtime (Idle time).
► ► Driver’s hours regulation. (Routes and associated Driver’s hours regulation. (Routes and associated
costs).costs).

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 7575
Group Assignment TaskGroup Assignment Task
Prepare tasks 2a and 2b as instructed on your Prepare tasks 2a and 2b as instructed on your
assignment sheetassignment sheet
Time allowed: 2 hoursTime allowed: 2 hours
A final draft of all tasks should be A final draft of all tasks should be
handed in by the date specified in your handed in by the date specified in your
scheduleschedule

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 7676
ReferencesReferences
IMI Management books (current)IMI Management books (current)
Armstrong: Human Resource Management 2001Armstrong: Human Resource Management 2001
Biddle: Evander: Human aspects of Management 1990Biddle: Evander: Human aspects of Management 1990
Nigel Slack: Operations Management 2001 Nigel Slack: Operations Management 2001
David Farnham: Employee relations In ContextDavid Farnham: Employee relations In Context
Peter Atrill: Financial Management for Non-specialistsPeter Atrill: Financial Management for Non-specialists
Peter Atrill & Eddie McLaney: Accounting and Finance Peter Atrill & Eddie McLaney: Accounting and Finance
for non-specialistsfor non-specialists
J. R. Dyson: Accounting for Non-Accounting StudentsJ. R. Dyson: Accounting for Non-Accounting Students

Sources of CapitalSources of Capital
There are a considerable number of available sources There are a considerable number of available sources
of finance available to limited liability companies, of finance available to limited liability companies,
although they vary depending upon the type of entity. although they vary depending upon the type of entity.
Central and local government, for example, are Central and local government, for example, are
heavily dependent upon current tax receipts for heavily dependent upon current tax receipts for
financing capital investment projects, while charities financing capital investment projects, while charities
rely on loans and grants. rely on loans and grants.

Sources of CapitalSources of Capital
The sources of finance available to companies The sources of finance available to companies
depend upon the time period involved:depend upon the time period involved:
The short-termThe short-term
The medium-termThe medium-term
The long-termThe long-term

Short-term Finance Short-term Finance
Trade creditTrade credit is a form of financing common in is a form of financing common in
all companies (and all other entities). An entity all companies (and all other entities). An entity
purchases goods and services from suppliers purchases goods and services from suppliers
and agrees to pay for them some days or and agrees to pay for them some days or
weeks after they have been delivered. weeks after they have been delivered.

Short-term FinanceShort-term Finance
Bank overdraftsBank overdrafts are a form of loan where the are a form of loan where the
bank's customer is allowed to draw out more bank's customer is allowed to draw out more
from the bank than has been deposited. from the bank than has been deposited.

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 8181
You normally pay an arrangement fee when an You normally pay an arrangement fee when an
overdraft is set up. A 'limit' up to which you overdraft is set up. A 'limit' up to which you
can borrow will be granted by the bank, and can borrow will be granted by the bank, and
reviewed annually, when it can be increased, reviewed annually, when it can be increased,
decreased or renewed at the same level. A decreased or renewed at the same level. A
renewal fee is payable for this service. renewal fee is payable for this service.
Short-term FinanceShort-term Finance

Short-term Finance - OverdraftShort-term Finance - Overdraft
An entity's overdraft may have to be secured by a An entity's overdraft may have to be secured by a
floating charge. This means that the bank has a floating charge. This means that the bank has a
general claim on any of the entity's assets if the entity general claim on any of the entity's assets if the entity
cannot repay the over- draft. There is usually an cannot repay the over- draft. There is usually an
upper limit, the amount overdrawn can usually be upper limit, the amount overdrawn can usually be
called in at any time, and the interest charge may be called in at any time, and the interest charge may be
high. The main advantages of an overdraft are that it high. The main advantages of an overdraft are that it
is flexible and that interest is normally only charged is flexible and that interest is normally only charged
on the outstanding balance on a daily basis. on the outstanding balance on a daily basis.

Bills of Exchange Bills of Exchange
A bill of exchange is simply an invoice that A bill of exchange is simply an invoice that
has been endorsed (i.e. accepted) by a has been endorsed (i.e. accepted) by a
merchant bankmerchant bank; the legal holder to obtain ; the legal holder to obtain
immediate finance can then sell it. immediate finance can then sell it.
The The interest charged depends upon the interest charged depends upon the
creditworthiness of the parties involvedcreditworthiness of the parties involved; ;
clearly, if an entity has a poor reputation, it clearly, if an entity has a poor reputation, it
will expect to pay more interest. will expect to pay more interest.

Commercial Paper Commercial Paper
Commercial paperCommercial paper is a form of short-term is a form of short-term
borrowing used by large listed companies.borrowing used by large listed companies.
It is a bearer documentIt is a bearer document, i.e. a person to , i.e. a person to
whom the document is payable without whom the document is payable without
naming that person. naming that person.
The minimum amount permitted is The minimum amount permitted is £100,000£100,000. .
This form of borrowing therefore is not This form of borrowing therefore is not
appropriate for very many entities. appropriate for very many entities.

Sources of Medium-term FinanceSources of Medium-term Finance
Banks may be prepared to Banks may be prepared to loanloan a fixed amount to a a fixed amount to a
customer over the customer over the medium- to long-termmedium- to long-term period. period.
The loan may be The loan may be secured on the company's assetssecured on the company's assets
and the and the interest charge may be variableinterest charge may be variable. .
Regular repayments of both the Regular repayments of both the capital and the capital and the
interestinterest will be expected. will be expected.
Bank loans are a common form of financing but the Bank loans are a common form of financing but the
restrictions often placed on the borrower may be restrictions often placed on the borrower may be
particularly particularly demandingdemanding. .

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 8686
Bank Working Capital FinanceBank Working Capital Finance
Finance arranged through bank-owned Finance arranged through bank-owned
companies companies
Finance houses, which are specialist Finance houses, which are specialist
companies owned in the main by the major companies owned in the main by the major
banks, offer alternative ways of obtaining banks, offer alternative ways of obtaining
fixed assets: fixed assets:

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 8787
Bank Working Capital FinanceBank Working Capital Finance
Hire purchaseHire purchase
An HP agreement from a finance house enables a An HP agreement from a finance house enables a
business to acquire an asset on the payment of a business to acquire an asset on the payment of a
deposit and to pay back the cost plus interest over a deposit and to pay back the cost plus interest over a
set period, at the end of which ownership of the asset set period, at the end of which ownership of the asset
passes to the borrowerpasses to the borrower
Hire purchase is often used to finance vehicles and Hire purchase is often used to finance vehicles and
machinerymachinery

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 8888
Bank Working Capital FinanceBank Working Capital Finance
LeasingLeasing
With a leasing agreement, the business has use With a leasing agreement, the business has use
of assets such as cars and computers bought by of assets such as cars and computers bought by
the finance house. The business pays a regular the finance house. The business pays a regular
'rental' payment, normally over a lease period 'rental' payment, normally over a lease period
of two to seven yearsof two to seven years

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 8989
LeasingLeasing
Ownership of the asset does not normally pass to Ownership of the asset does not normally pass to
the business because the asset (the car, the the business because the asset (the car, the
computer) will have become out-of-date and computer) will have become out-of-date and
will need renewing at the end of the lease will need renewing at the end of the lease
period. period.
Clearly a lease is not a loan, but it can Clearly a lease is not a loan, but it can
substantially reduce the financial requirements substantially reduce the financial requirements
of a business when it needs to acquire assets of a business when it needs to acquire assets
such as computer equipment and fleets of such as computer equipment and fleets of
company cars. company cars.

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 9090
Bank Working Capital FinanceBank Working Capital Finance
Factoring - working capital financeFactoring - working capital finance
Many banks also provide factoring services Many banks also provide factoring services
through specialist factoring companiesthrough specialist factoring companies

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 9191
Factoring - Working Capital Factoring - Working Capital
FinanceFinance
A business may have valuable financial resources tied up A business may have valuable financial resources tied up
because its customers owe it money and have not yet because its customers owe it money and have not yet
paid. A factoring company will effectively 'buy' these paid. A factoring company will effectively 'buy' these
debts by providing a number of services:debts by providing a number of services:
--It will lend up to 80% of outstanding customer debtsIt will lend up to 80% of outstanding customer debts
--It will deal with all the paperwork of collecting It will deal with all the paperwork of collecting
customer debtscustomer debts
--Insure against non-payment of debtsInsure against non-payment of debts

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 9292
Factoring - Working Capital Factoring - Working Capital
FinanceFinance
Factoring releases money due to the business Factoring releases money due to the business
and allows the business to use it in its general and allows the business to use it in its general
operations and expansion plans. It is therefore operations and expansion plans. It is therefore
a valuable source of short-term finance. a valuable source of short-term finance.

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 9393
Bank Fixed Asset Finance Bank Fixed Asset Finance
Business loanBusiness loan
This is a fixed medium-term loan, typically for This is a fixed medium-term loan, typically for
between 3 and 10 years, to cover the purchase between 3 and 10 years, to cover the purchase
of capital items such as machinery or of capital items such as machinery or
equipment. Interest is normally 2% to 3% over equipment. Interest is normally 2% to 3% over
base rate, and repayments are by instalmentsbase rate, and repayments are by instalments

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 9494
Bank Fixed Asset FinanceBank Fixed Asset Finance
Commercial mortgageCommercial mortgage
If you are buying premises for your business you If you are buying premises for your business you
can arrange to borrow long-term by means of a can arrange to borrow long-term by means of a
commercial mortgage, typically up to 80% of commercial mortgage, typically up to 80% of
the value of the property, repayable over a the value of the property, repayable over a
period of up to 25 yearsperiod of up to 25 years

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 9595
Bank Fixed Asset FinanceBank Fixed Asset Finance
Your premises will be taken as security for the Your premises will be taken as security for the
loan: if the business fails, the premises will be loan: if the business fails, the premises will be
sold to repay the bank. sold to repay the bank.

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 9696
Bank Fixed Asset Finance Bank Fixed Asset Finance
Finance for companies: venture capital Finance for companies: venture capital There There
are many specialist banks - 'merchant banks' - are many specialist banks - 'merchant banks' -
and investment companies which offer advice and investment companies which offer advice
and financial assistance to limited companies and financial assistance to limited companies
looking for capital. This financial assistance looking for capital. This financial assistance
takes the form of loans and venture capital, takes the form of loans and venture capital,
which provides finance for fixed assets and for which provides finance for fixed assets and for
working capital. working capital.

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 9797
Bank Fixed Asset Finance Bank Fixed Asset Finance
Venture capital companies will view these Venture capital companies will view these
companies as investment opportunities and companies as investment opportunities and
will put in money in the form of loans or will put in money in the form of loans or
purchase of shares, or both. In return, they purchase of shares, or both. In return, they
may expect an element of control over the may expect an element of control over the
company and will possibly insist on having a company and will possibly insist on having a
director on the board of the company. director on the board of the company.

28/06/1128/06/11
BTEC Higher Nationals in Motor Vehicle BTEC Higher Nationals in Motor Vehicle
Management & TechnolgyManagement & Technolgy 9898
Bank Fixed Asset FinanceBank Fixed Asset Finance
A venture capital company considering investing A venture capital company considering investing
will look for a business with good sales and will look for a business with good sales and
profit record - or potential. profit record - or potential.

Sources of Medium-term FinanceSources of Medium-term Finance
Credit salesCredit sales are a form of borrowing in which are a form of borrowing in which
the purchaser agrees to pay for goods (and the purchaser agrees to pay for goods (and
services) provided on an instalment basis over services) provided on an instalment basis over
an agreed period of time. an agreed period of time.
Once the agreement has been signed, the legal Once the agreement has been signed, the legal
ownership of the goods is passed to the ownership of the goods is passed to the
purchaser and the seller purchaser and the seller cannot reclaimcannot reclaim them. them.

LeasingLeasing
Leasing is a form of rentingLeasing is a form of renting. A fixed asset (such as a . A fixed asset (such as a
car or a printing press) remains legally in the car or a printing press) remains legally in the
ownership of the lessor. In the case of some leases, ownership of the lessor. In the case of some leases,
the asset may never actually be returned; in effect, the the asset may never actually be returned; in effect, the
lessee becomes lessee becomes de facto de facto the owner. the owner.
Leasing can be expensive, although if the lessor passes Leasing can be expensive, although if the lessor passes
on what can sometimes be some very generous tax on what can sometimes be some very generous tax
allowances, it can be a reasonably economic method allowances, it can be a reasonably economic method
of financing projects. of financing projects.

Long-term FinanceLong-term Finance
Long-term finance can generally be obtained from the Long-term finance can generally be obtained from the
following sources. following sources.
Debentures are formal long-term loansDebentures are formal long-term loans made to a made to a
company; they may be for a certain period or open-company; they may be for a certain period or open-
ended. Debentures are usually secured on all or some ended. Debentures are usually secured on all or some
of an entity's assets. Interest is payable, but because it of an entity's assets. Interest is payable, but because it
is allowable against corporation tax, debentures can is allowable against corporation tax, debentures can
be an economic method of financing specific projects. be an economic method of financing specific projects.

Long-term FinanceLong-term Finance
Loan capital, for example is a form of borrowing Loan capital, for example is a form of borrowing
in which investors are paid a regular amount of in which investors are paid a regular amount of
interest and their capital is eventually repaid. interest and their capital is eventually repaid.
The investors are creditors of the entity but they The investors are creditors of the entity but they
have no voting rights. have no voting rights.

Long-term FinanceLong-term Finance
Unsecured loan stock is similar to debenture Unsecured loan stock is similar to debenture
stock except that there is no security for the stock except that there is no security for the
loan. loan.
The interest rate tends to be higher than that on The interest rate tends to be higher than that on
debenture stock because of the greater risk. debenture stock because of the greater risk.
Convertible unsecured loan stock gives Convertible unsecured loan stock gives
stockholders the right to convert their stock stockholders the right to convert their stock
into ordinary shares at specified dates. into ordinary shares at specified dates.

Long-term FinanceLong-term Finance
Eurobond loan capitalEurobond loan capital can be obtained by can be obtained by
borrowing overseas in the 'Euro' market. The borrowing overseas in the 'Euro' market. The
loans are usually unsecured and they are loans are usually unsecured and they are
redeemed at their face value on a certain date. redeemed at their face value on a certain date.
Interest is normally paid annually; the rate Interest is normally paid annually; the rate
depends partly on the size of the loan and depends partly on the size of the loan and
partly on the particular issuer. partly on the particular issuer.

Share CapitalShare Capital
Although the law recognizes that Although the law recognizes that limited liability limited liability
companies are separate entity’scompanies are separate entity’s with a life of their with a life of their
own the law likewise recognises the corporate own the law likewise recognises the corporate
responsibility and governanceresponsibility and governance needed by the needed by the
owners. owners.
Only one person is now required to form a private Only one person is now required to form a private
company (two for a public company),company (two for a public company), and that and that
person (or persons, if there is more than one), agrees person (or persons, if there is more than one), agrees
to make a capital contribution by buying a number of to make a capital contribution by buying a number of
shares. shares.

Share CapitalShare Capital
The capital of a company is known as its share The capital of a company is known as its share
capital. The share capital will be made up of a capital. The share capital will be made up of a
number of shares of a certain denomination, number of shares of a certain denomination,
such as 20p, 50p, and £1. such as 20p, 50p, and £1.

Share CapitalShare Capital
A member may hold only one share, or many hundreds A member may hold only one share, or many hundreds
of thousands, depending upon the total share capital of thousands, depending upon the total share capital
of the company, the denomination of the shares, and of the company, the denomination of the shares, and
the amount that he wishes to contribute. the amount that he wishes to contribute.
The maximum amount of capital that the company The maximum amount of capital that the company
envisages ever raising has to be stated. envisages ever raising has to be stated.
This is known as its This is known as its authorized share capitalauthorized share capital, although , although
this does not necessarily mean that it will issue shares this does not necessarily mean that it will issue shares
up to that amount. up to that amount.

Share CapitalShare Capital
There are two main types of shares: There are two main types of shares:
Ordinary shares Ordinary shares
Preference shares. Preference shares.

Rights IssuesRights Issues
Expansion of the company could be financed by Expansion of the company could be financed by
increasing the number ofincreasing the number of ordinary shares available ordinary shares available, ,
either on the open market or to existing shareholders either on the open market or to existing shareholders
in the form of a rights issue. in the form of a rights issue.
An increase in an entity's ordinary share capital dilutes An increase in an entity's ordinary share capital dilutes
the holding of existing shareholders and all the holding of existing shareholders and all
shareholders will expect to receive shareholders will expect to receive increasing increasing
amounts of dividend. amounts of dividend.

Share CapitalShare Capital
Ordinary sharesOrdinary shares do not usually entitle the do not usually entitle the
shareholder to any specific level of dividend shareholder to any specific level of dividend
and the rights of other types of shareholders and the rights of other types of shareholders
always take precedence over the rights of the always take precedence over the rights of the
ordinary shareholders, e.g. if the company ordinary shareholders, e.g. if the company
goes into liquidation. goes into liquidation.

Preference SharesPreference Shares
Alternatively, new or additional Alternatively, new or additional preference preference
sharesshares could be offered; preference could be offered; preference
shareholders would have an automatic right to shareholders would have an automatic right to
a certain percentage level of dividend, and so a certain percentage level of dividend, and so
the issue of preference shares limits the the issue of preference shares limits the
amount of dividend available to ordinary amount of dividend available to ordinary
shareholders. shareholders.

Share CapitalShare Capital
Preference shareholdersPreference shareholders are normally entitled to a are normally entitled to a
fixed level of dividend, and they usually have priority fixed level of dividend, and they usually have priority
over the ordinary shareholders if the company is over the ordinary shareholders if the company is
liquidated. Sometimes the preference shares are liquidated. Sometimes the preference shares are
classed as cumulative; this means that if the company classed as cumulative; this means that if the company
cannot pay its preference dividend in one year, the cannot pay its preference dividend in one year, the
amount due accrues until such time as the company amount due accrues until such time as the company
has the profits to pay all of the accumulated has the profits to pay all of the accumulated
dividends. dividends.

Share CapitalShare Capital
The amount of share capital that it has actually The amount of share capital that it has actually
issued is known as the issued share capitalissued is known as the issued share capital. .
Sometimes when shares are issued, prospective Sometimes when shares are issued, prospective
shareholders are only required to contribute to them shareholders are only required to contribute to them
in instalments. in instalments.
Once all of the issued share capital has been received in Once all of the issued share capital has been received in
cash, it is described as being fully paid. cash, it is described as being fully paid.

Debentures LoansDebentures Loans
Companies often borrow money in the form of Companies often borrow money in the form of
debentures. debentures.
Companies issue stocks called debentures, Companies issue stocks called debentures,
which are essentially long-term (over 15 which are essentially long-term (over 15
years) bondsyears) bonds. .
Debentures have advantages both to the Debentures have advantages both to the
companies, which issue them, and to the companies, which issue them, and to the
investors who buy them. investors who buy them.

Debentures LoansDebentures Loans
The investor has the advantage of a high level of The investor has the advantage of a high level of
securitysecurity, since most debentures are secured by a , since most debentures are secured by a
charge on the assets of the companycharge on the assets of the company, however they , however they
may not be secured at allmay not be secured at all. .
In addition, debenture holders can appoint a receiver if In addition, debenture holders can appoint a receiver if
the firm is in financial trouble and they rank above all the firm is in financial trouble and they rank above all
other loan creditors and shareholders when a failed other loan creditors and shareholders when a failed
company's assets are being redistributed. company's assets are being redistributed.

Debentures LoansDebentures Loans
Debentures as like shares are freely traded on the Debentures as like shares are freely traded on the
stock market. As such the nearer the trade date stock market. As such the nearer the trade date
to the notes redemption date the greater the to the notes redemption date the greater the
price as this relates to the developing value in price as this relates to the developing value in
relation to its face value, and may exceed this relation to its face value, and may exceed this
if trading is good on the company stock.if trading is good on the company stock.

Debentures LoansDebentures Loans
Debenture holders have no voting rights, as such Debenture holders have no voting rights, as such
from a company perspective this can be an from a company perspective this can be an
advantage. Similarly a company can claim advantage. Similarly a company can claim
taxation relief against debenture issues in taxation relief against debenture issues in
interest expenditure as these constitute long interest expenditure as these constitute long
term loans. term loans.

Debentures LoansDebentures Loans
Companies are obliged in law to pay interest on, Companies are obliged in law to pay interest on,
and repay the capital of, debentures, regardless and repay the capital of, debentures, regardless
of whether the firm is making a profit or a of whether the firm is making a profit or a
loss!loss!

Debentures LoansDebentures Loans
A debenture loan may be secured on specific A debenture loan may be secured on specific
assets of the company, on its assets generally, assets of the company, on its assets generally,
or it might not be secured at all. or it might not be secured at all.
If it is secured and the company cannot repay it If it is secured and the company cannot repay it
on its due repayment date, the debenture on its due repayment date, the debenture
holders may sell the secured assets and use the holders may sell the secured assets and use the
amount to settle the amount owing to them. amount to settle the amount owing to them.

Debentures LoansDebentures Loans
Debentures, like shares, may be bought and sold Debentures, like shares, may be bought and sold
freely on the Stock Exchangefreely on the Stock Exchange. .
The nearer the redemption date for the repayment for The nearer the redemption date for the repayment for
the debentures, the closer the market price will be to the debentures, the closer the market price will be to
their their nominal nominal (i.e. their face, or stated paper) value, (i.e. their face, or stated paper) value,
but sometimes if they are to be redeemed at a but sometimes if they are to be redeemed at a
premium (i.e. in excess of their nominal value), the premium (i.e. in excess of their nominal value), the
market price may exceed the nominal value. market price may exceed the nominal value.

Debentures LoansDebentures Loans
holders are holders are not shareholdersnot shareholders of the company, and they of the company, and they
have no voting rights. have no voting rights.
From the company's point of view, one further From the company's point of view, one further
advantage of raising capital in the form of debenture advantage of raising capital in the form of debenture
loans is that for taxation purposes the interest can be loans is that for taxation purposes the interest can be
charged as a business expense against the profit for charged as a business expense against the profit for
the year (unlike dividends paid to shareholders). the year (unlike dividends paid to shareholders).

Information, Rights and Company Information, Rights and Company
AccountsAccounts
Disclosure of It is necessary for both public and private Disclosure of It is necessary for both public and private
companies to supply a minimum information amount companies to supply a minimum information amount
of information to their members. of information to their members.
Ordinary Shareholders have no common right to the Ordinary Shareholders have no common right to the
access of company assets property or information.access of company assets property or information.
This restraint is imposed in order to protect the This restraint is imposed in order to protect the
employed management from pressure of liaison employed management from pressure of liaison
rather than managerrather than manager..

Information, Rights and Company Information, Rights and Company
AccountsAccounts
Instead, shareholders in both private and public Instead, shareholders in both private and public
companies have to be supplied with an annual report companies have to be supplied with an annual report
containing at least the minimum amount of containing at least the minimum amount of
information required by the Companies Act 1985. information required by the Companies Act 1985.
The company also has to file (as it is called) a copy of The company also has to file (as it is called) a copy of
the report (or abbreviated version) with the Registrar the report (or abbreviated version) with the Registrar
of Companies. This means that, on payment of a of Companies. This means that, on payment of a
small fee, the report is open for inspection by any small fee, the report is open for inspection by any
member of the public who wants to consult it. member of the public who wants to consult it.

Information, Rights and Company Information, Rights and Company
AccountsAccounts
Company accounts are very similar to those of Company accounts are very similar to those of sole sole
traderstraders. .
They do, however, tend to be more detailed, and some They do, however, tend to be more detailed, and some
modificationsmodifications have to be made in order to comply have to be made in order to comply
with various with various legal requirementslegal requirements. .
It must be clearly understood that any limited liability It must be clearly understood that any limited liability
company is regarded as being a separate entity, company is regarded as being a separate entity, i.e. i.e.
separate from those shareholders who own it separate from those shareholders who own it
collectively, and separate from anyone who works collectively, and separate from anyone who works
for it.for it.

ResponsibilitiesResponsibilities
Directors are the most senior level of management. Directors are the most senior level of management.
They are responsible for the day-to-day running of They are responsible for the day-to-day running of
the company, and they answer to the shareholdersthe company, and they answer to the shareholders. .
Directors are officers of the company, and any Directors are officers of the company, and any
remuneration paid to them as directors is charged remuneration paid to them as directors is charged
as an expense of the businessas an expense of the business. .
Directors may also be shareholders, this detail must be Directors may also be shareholders, this detail must be
disclosed and should not be confused with salary all disclosed and should not be confused with salary all
benefits subject to tax.benefits subject to tax.

OfficeOffice
The distinction between employees and shareholder-The distinction between employees and shareholder-
employees is an important one.employees is an important one.
This is especially the case in very small companies This is especially the case in very small companies
where both employees and shareholders may be one where both employees and shareholders may be one
and the same. and the same.
Thus shareholder employees exhibit no common traits Thus shareholder employees exhibit no common traits
with shareholders or partnerships. with shareholders or partnerships.
The main difference is that the shareholder The main difference is that the shareholder
employee has a vested interest in the performance employee has a vested interest in the performance
of the organisationof the organisation

Capital GearingCapital Gearing
The investment ratio: capital-gearing ratio will be The investment ratio: capital-gearing ratio will be
discussed in detail within the Finance delivery Unit 4.discussed in detail within the Finance delivery Unit 4.
Linked to the Return On Capital Employed it can Linked to the Return On Capital Employed it can
present problems of interpretation.present problems of interpretation.
As outlined companies are financed out of a mixture of As outlined companies are financed out of a mixture of
share capital, retained profits and loans. share capital, retained profits and loans.
Loans may be long-term (such as debentures), or short-Loans may be long-term (such as debentures), or short-
term (such as credit given by trade creditors). term (such as credit given by trade creditors).

Capital GearingCapital Gearing
If a company, therefore, finances itself from a If a company, therefore, finances itself from a high high
level of loanslevel of loans, there is obviously a higher risk in , there is obviously a higher risk in
investing in it. This arises for two main reasons:investing in it. This arises for two main reasons:
1.1.The The higher the loanshigher the loans, the more , the more interestinterest that the that the
company will have to pay, and that may affect the company will have to pay, and that may affect the
company's ability to pay an company's ability to pay an ordinary dividendordinary dividend..
2.2.If the company cannot find the cash to repay its loans, If the company cannot find the cash to repay its loans,
the ordinary share holders may not get any money the ordinary share holders may not get any money
back if the company goes into liquidation.back if the company goes into liquidation.

Capital GearingCapital Gearing
As far as item 1 is concerned, there will be no particular As far as item 1 is concerned, there will be no particular
problem arising if profits are problem arising if profits are increasingincreasing, because the , because the
interest on its loans will become a smaller and interest on its loans will become a smaller and
smaller proportion of the total profit. smaller proportion of the total profit.
But it could become a problem if profits are But it could become a problem if profits are fallingfalling and and
the interest has to be paid out of a continuing decline the interest has to be paid out of a continuing decline
in profit. It might then be difficult to payout any in profit. It might then be difficult to payout any
ordinary dividend. ordinary dividend.

Capital GearingCapital Gearing
There are many different ways of calculating capital There are many different ways of calculating capital
gearing. As indicated above, the entity will have been gearing. As indicated above, the entity will have been
financed by a combination of shareholders' funds and financed by a combination of shareholders' funds and
loans.loans.
The relationship between them can be expressed in two The relationship between them can be expressed in two
most common methods as follows:most common methods as follows:
1.1.LoansLoans//Shareholders' funds + LoansShareholders' funds + Loans
2.2.LoansLoans//Shareholders' fundsShareholders' funds

Capital GearingCapital Gearing
The first method, since it expresses a percentage, The first method, since it expresses a percentage,
it appears clearer, i.e. ‘it appears clearer, i.e. ‘xx% of the company has % of the company has
been financed by loans’. been financed by loans’.
The second method shows the loans represent a The second method shows the loans represent a
certain proportion of the shareholders' funds certain proportion of the shareholders' funds
(including preference shares). (including preference shares).

Shareholders' Funds and LoansShareholders' Funds and Loans
These include the following items:These include the following items:
--Ordinary share capitalOrdinary share capital
--Preference share capital (Note 1)Preference share capital (Note 1)
--Share premium accountShare premium account
--Capital reservesCapital reserves
--Revenue reservesRevenue reserves
--Other reservesOther reserves
--Profit and loss accountProfit and loss account

Shareholders' Funds and LoansShareholders' Funds and Loans
Loans may (but will not necessarily) include the following Loans may (but will not necessarily) include the following
items: items:
--Preference share capital (Note 1)Preference share capital (Note 1)
--Debentures Debentures
--Loans Loans
--OverdraftsOverdrafts
--Provisions Provisions
--Accruals Accruals
--Current liabilities Current liabilities
--Other amounts due for paymentOther amounts due for payment

NotesNotes
Notes: Notes:
(1) Some accountants exclude preference share (1) Some accountants exclude preference share
capital from shareholders' funds because they capital from shareholders' funds because they
regard it as a type of loan. regard it as a type of loan.
(2) In a complex group structure, you might also (2) In a complex group structure, you might also
come across other items that could be classed come across other items that could be classed
as loans. as loans.

Capital GearingCapital Gearing
The following is a straightforward definition of The following is a straightforward definition of
capital gearing: capital gearing:
Preference shares + Long-term loansPreference shares + Long-term loans
Total Shareholders' funds + Long-term loans Total Shareholders' funds + Long-term loans
x 100 x 100 = = xx%%

ActivityActivity
Using the following data please calculate the Using the following data please calculate the
capital gearing ratio for the 3 businessescapital gearing ratio for the 3 businesses
28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 136136
BusinessLong term loansOrdinary sharesPreference sharesRATIO
A £680,000.00 £2,000,000.00£1,500,000.00
B £40,000.00 £70,000.00 £350,000.00
C £10,000.00 £30,000.00 £110,000.00

ActivityActivity
AnswersAnswers
28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 137137
BusinessLong term loansOrdinary sharesPreference sharesRATIO
A £680,000.00 £2,000,000.00£1,500,000.00 52.1%
B £40,000.00 £70,000.00 £350,000.00 85.0%
C £10,000.00 £30,000.00 £110,000.00 80.0%

Capital GearingCapital Gearing
A company that has financed itself out of a A company that has financed itself out of a
high proportion of loanshigh proportion of loans (e.g. in the form of a (e.g. in the form of a
combination of preference shares and long-combination of preference shares and long-
term loans) is known as a term loans) is known as a highly geared highly geared
company. company.
Conversely, a company with a Conversely, a company with a low levellow level of of
loans - is regarded as being loans - is regarded as being low-gearedlow-geared. .

Capital GearingCapital Gearing
Note that high and low in this context are Note that high and low in this context are
relative terms. As indicated above, a highly relative terms. As indicated above, a highly
geared company is potentially a higher risk geared company is potentially a higher risk
investment, as it has to earn sufficient profit to investment, as it has to earn sufficient profit to
cover the interest payments and the preference cover the interest payments and the preference
dividend before it can payout any ordinary dividend before it can payout any ordinary
dividend. dividend.

Capital GearingCapital Gearing
This should not be a problem when profits are This should not be a problem when profits are
rising, but if they are falling, then they may rising, but if they are falling, then they may
not be sufficient to cover even the preference not be sufficient to cover even the preference
dividend. dividend.
The gearing ratios make up important elements The gearing ratios make up important elements
of the overall capital and investment ratio of the overall capital and investment ratio
analysis.analysis.

Capital Structure and Financial Capital Structure and Financial
RiskRisk
In addition to an assessment of the short-term liquidity In addition to an assessment of the short-term liquidity
position of a company, it is also important to examine position of a company, it is also important to examine
the the overall means by which a company finances its overall means by which a company finances its
operationsoperations. .
It is usual for a company to be financed partly by loans It is usual for a company to be financed partly by loans
from banks and other lenders and partly by the funds from banks and other lenders and partly by the funds
of its ordinary shareholders. of its ordinary shareholders.

Capital Structure and Financial Capital Structure and Financial
RiskRisk
These two sources of finance are normally These two sources of finance are normally
referred to respectively as referred to respectively as debt and equitydebt and equity, ,
and the relationship between the two gives a and the relationship between the two gives a
measure of the measure of the gearing gearing of the company. of the company.
Gearing has important implications for the long-Gearing has important implications for the long-
term stability of a company because of its term stability of a company because of its
effect on financial risk. effect on financial risk.

Capital Structure and Financial Capital Structure and Financial
RiskRisk
The providers of loan capital (debt) require a fixed The providers of loan capital (debt) require a fixed
amount of interest to be paid to them each year, amount of interest to be paid to them each year,
irrespective of the level of profits earned. irrespective of the level of profits earned.
The providers of equity capital do not enjoy a fixed The providers of equity capital do not enjoy a fixed
reward each year, but are entitled to a percentage of reward each year, but are entitled to a percentage of
the residual profits after all other payments including the residual profits after all other payments including
interest charges have been met. interest charges have been met.

ExampleExample
For example, if an all-equity firm earns
operating profits after tax of £200,000, then
the amount accruing to ordinary shareholders,
either as dividends or retained profits, will be
£200,000.
If in the next year the profits fall by 25 per
cent to £150,000, then the amount accruing
to ordinary shareholders will also fall by 25
per cent.

Example continuedExample continued
However, if the company were geared, i.e. if it However, if the company were geared, i.e. if it
were financed partly by loans requiring an were financed partly by loans requiring an
after-tax fixed-interest payment of, say, after-tax fixed-interest payment of, say,
£75,000 per year, then the profits available to £75,000 per year, then the profits available to
ordinary shareholders in the first year would ordinary shareholders in the first year would
be £125,000 (£200,000 minus interest of be £125,000 (£200,000 minus interest of
£75,000), but in the second year these would £75,000), but in the second year these would
fall to £75,000 (£150,000 minus interest of fall to £75,000 (£150,000 minus interest of
£75,000), a decline of 40 per cent. £75,000), a decline of 40 per cent.

ConverselyConversely
Conversely, if profits had risen by 25 per cent to Conversely, if profits had risen by 25 per cent to
£250,000, the earning available to the ordinary £250,000, the earning available to the ordinary
shareholders in the geared company would shareholders in the geared company would
have increased to £175,000 (£250,000 minus have increased to £175,000 (£250,000 minus
£75,000), an increase of 40 per cent. £75,000), an increase of 40 per cent.

Return Debt Vs. EquityReturn Debt Vs. Equity
Nevertheless, Nevertheless, gearing does have its advantagesgearing does have its advantages. It . It
might be reasonable to expect that the benefits of a might be reasonable to expect that the benefits of a
fixed amount of interest every year and priority over fixed amount of interest every year and priority over
shareholders on liquidation should make the cost of shareholders on liquidation should make the cost of
debt capital cheaper than that of equity. debt capital cheaper than that of equity.
In other words, the In other words, the average return expected by average return expected by
lenders should be lower than the average return lenders should be lower than the average return
expected by shareholdersexpected by shareholders. .

Tax AllowTax Allow
Furthermore, the interest payable on loan capital is an Furthermore, the interest payable on loan capital is an
allowable expense when determining taxable profit, allowable expense when determining taxable profit,
whereas dividends are a distribution out of the after-whereas dividends are a distribution out of the after-
tax profits. tax profits.
Thus, for a company that pays corporation tax at the rate Thus, for a company that pays corporation tax at the rate
of, say, 35% on its taxable profits, the after-tax cost of, say, 35% on its taxable profits, the after-tax cost
of interest payments will be reduced in the same of interest payments will be reduced in the same
proportion, because every £100 paid in interest will proportion, because every £100 paid in interest will
reduce taxable profit by £100 and therefore tax reduce taxable profit by £100 and therefore tax
payable by £35. payable by £35.

Return Debt Vs. EquityReturn Debt Vs. Equity
To the extent that debt is a less expensive source of To the extent that debt is a less expensive source of
finance than equity, then initially the use of gearing finance than equity, then initially the use of gearing
might be beneficial, providing that the advantages of might be beneficial, providing that the advantages of
lower-cost debt more than compensate for the lower-cost debt more than compensate for the
disadvantages caused by increased financial risk. disadvantages caused by increased financial risk.
However, as gearing increases, the financial-risk effect However, as gearing increases, the financial-risk effect
will begin to outweigh the benefits of low- cost debt. will begin to outweigh the benefits of low- cost debt.

Balance?Balance?
This implies the existence of some optimal level This implies the existence of some optimal level
of gearing that a company should try to of gearing that a company should try to
achieve. achieve.
Empirical evidence would suggest that Empirical evidence would suggest that
companies no longer assume that one specific companies no longer assume that one specific
level of gearing is appropriate all the time and level of gearing is appropriate all the time and
in all the circumstances. in all the circumstances.

Return Debt Vs. EquityReturn Debt Vs. Equity
For example, during the downturn of an For example, during the downturn of an
economic cycle companies will attempt to economic cycle companies will attempt to
reduce their gearing and then reverse it on the reduce their gearing and then reverse it on the
upturn. upturn.
This will minimize the risks concerning non-This will minimize the risks concerning non-
payment of interest in poor trading conditions payment of interest in poor trading conditions
on the one hand, and on the other hand enable on the one hand, and on the other hand enable
the company to gain the benefits of the gearing the company to gain the benefits of the gearing
on the upturn in profits. on the upturn in profits.

Return Debt Vs. EquityReturn Debt Vs. Equity
The ever widening portfolio of types of long- The ever widening portfolio of types of long-
and short-term capital available to a company and short-term capital available to a company
may make life more complex for financial may make life more complex for financial
managers, but at the same time it will managers, but at the same time it will
hopefully reduce the financial risks by the hopefully reduce the financial risks by the
better matching of fund type with corporate better matching of fund type with corporate
need. need.

Legal Duties for CompaniesLegal Duties for Companies
(UK)(UK)
The forming of limited companies requires The forming of limited companies requires
complex procedures and structure when complex procedures and structure when
compared to sole trader and partnershipscompared to sole trader and partnerships
28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 153153

Documentation Documentation

Documentation Documentation
Companies House, a government-owned agency, Companies House, a government-owned agency,
regulates Companies. regulates Companies.
All companies have to register with Companies All companies have to register with Companies
House and are issued with the company House and are issued with the company
equivalent of a birth certificate - the equivalent of a birth certificate - the
Certificate of IncorporationCertificate of Incorporation. .

Documentation Documentation
Small businesses such as Small businesses such as sole traders and sole traders and
partnershipspartnerships require relatively little in the require relatively little in the
way of paperwork. way of paperwork.
Setting up a limited company, on the other hand, Setting up a limited company, on the other hand,
requires substantial documentation. requires substantial documentation.

Documentation Documentation
In addition, a company will also need two further In addition, a company will also need two further
documents: documents:
--The Memorandum of AssociationThe Memorandum of Association - which states - which states
what the company can dowhat the company can do
--The Articles of AssociationThe Articles of Association - the internal - the internal
'rulebook' of the company 'rulebook' of the company
Refer to Refer to Automotive IndependentAutomotive Independent registration registration

Limited CompanyLimited Company
A company registered in accordance with the A company registered in accordance with the
provisions of the Companies Acts is a separate provisions of the Companies Acts is a separate
legal entity distinct from its owners or legal entity distinct from its owners or
shareholders, and its directors or managers. It shareholders, and its directors or managers. It
can enter into contracts and sue or be sued in can enter into contracts and sue or be sued in
its own right. It is taxed separately through its own right. It is taxed separately through
Corporation Tax. Corporation Tax.

Limited CompanyLimited Company
There is a divorce between management and There is a divorce between management and
ownership, with a board of directors elected by ownership, with a board of directors elected by
the shareholders to control the day-to-day the shareholders to control the day-to-day
running of the business. running of the business.
There need be only There need be only two shareholderstwo shareholders and and one one
directordirector, and , and shareholders can also be shareholders can also be
directors. directors.

AdvantagesAdvantages
The advantage of this form of business is that the The advantage of this form of business is that the
liability of the shareholders is limited by the liability of the shareholders is limited by the
amount of capitalamount of capital they put into the business. What is they put into the business. What is
more, a company has unlimited life and can be sold more, a company has unlimited life and can be sold
on to other shareholders. on to other shareholders.
There is no limit to the number of shareholders. There is no limit to the number of shareholders.
Therefore a limited company can attract Therefore a limited company can attract
additional risk capital from investors who may not additional risk capital from investors who may not
wish to be involved in the day-to-day running of wish to be involved in the day-to-day running of
the businessthe business. .

AdvantagesAdvantages
Also, because of the regulation they face, Also, because of the regulation they face,
bankers prefer to lend to companies rather than bankers prefer to lend to companies rather than
sole traders, although they may still require sole traders, although they may still require
personal guarantees. Clearly this is the best personal guarantees. Clearly this is the best
form for a growth business that will require form for a growth business that will require
capital and will face risks as it grows. capital and will face risks as it grows.

DisadvantagesDisadvantages
Nevertheless there are some disadvantages to this form Nevertheless there are some disadvantages to this form
of business. Under the Companies Acts, a company of business. Under the Companies Acts, a company
must keep certain books of account and appoint an must keep certain books of account and appoint an
auditor. It must file an annual return with Companies auditor. It must file an annual return with Companies
House, which includes accounts and details of House, which includes accounts and details of
directors and shareholders. directors and shareholders.
This takes time and money and means that competitors This takes time and money and means that competitors
might have access to information that they would not might have access to information that they would not
otherwise. otherwise.

IncorporationIncorporation
The easiest way to set up a company is to buy one ‘off the The easiest way to set up a company is to buy one ‘off the
shelf' from a Company Registration Agent at a cost of shelf' from a Company Registration Agent at a cost of
approximately £24.99: approximately £24.99: http://www.ukplc.nethttp://www.ukplc.net. .
This avoids the entire tedious form filling that is This avoids the entire tedious form filling that is
otherwise required. It also saves time. Agents will also otherwise required. It also saves time. Agents will also
show you how to go about changing the company's show you how to go about changing the company's
name if you want to. name if you want to.

Investor InformationInvestor Information
Public Limited Companies...are able to offer shares to and Public Limited Companies...are able to offer shares to and
raise funds from the general public, although this is not raise funds from the general public, although this is not
compulsory. compulsory.
Some are run privately but prefer having the status of a plc. Some are run privately but prefer having the status of a plc.
Plc's must have a minimum of:Plc's must have a minimum of:
2 directors, 2 directors,
a qualified company secretary, a qualified company secretary,
and a minimum share capital of £50,000.and a minimum share capital of £50,000.
Most public limited companies in the United Kingdom have Most public limited companies in the United Kingdom have
their shares listed on the London Stock Exchange, and hence their shares listed on the London Stock Exchange, and hence
they are often referred to as listed companies. they are often referred to as listed companies.
E.g. E.g. http://www.douglas-cs.co.uk/plchttp://www.douglas-cs.co.uk/plc..

Investor InformationInvestor Information
Any company that does not make its shares available to Any company that does not make its shares available to
the public is regarded as being a the public is regarded as being a private companyprivate company. .
Like public companies, private companies must also Like public companies, private companies must also
have an authorized share capital, although no have an authorized share capital, although no
minimum amount is prescribed. Otherwise, they are minimum amount is prescribed. Otherwise, they are
very similar to public companies in respect of their very similar to public companies in respect of their
share capital requirements. share capital requirements.

Summary of Advantages and Summary of Advantages and
DisadvantagesDisadvantages


Sole trader Partnership Limited company
Advantages
Easy to form

Minimum of regulation
Easy to form

Minimum of regulation
Limited liability

Easier to borrow money

Can raise risk capital
through additional
shareholders

Can be sold-on
Pays Corporation Tax
Disadvantages
Unlimited
Personal liability

More difficult to borrow
money

Pay personal tax
Unlimited personal
liability for partnership

More difficult to borrow
money

'Cease trading' whenever
partners change

Pay personal tax
Must comply with
Companies Acts

Greater regulation

Greater disclosure of
information

Formation of a Limited CompanyFormation of a Limited Company
The Companies Act generally allows one or The Companies Act generally allows one or
more persons to form a company for any more persons to form a company for any
lawful purpose by subscribing to its lawful purpose by subscribing to its
memorandum of association. memorandum of association.
A public company or an unlimited company A public company or an unlimited company
must have at least two subscribers. must have at least two subscribers.

Formation of a Limited CompanyFormation of a Limited Company
There are four main types of company: There are four main types of company:
Private company limited by shares - members' Private company limited by shares - members'
liability is limited to the amount unpaid on shares liability is limited to the amount unpaid on shares
they hold. they hold.
Private company limited by guarantee - members' Private company limited by guarantee - members'
liability is limited to the amount they have agreed to liability is limited to the amount they have agreed to
contribute to the company's assets if it is wound up. contribute to the company's assets if it is wound up.
Private unlimited company - there is no limit to the Private unlimited company - there is no limit to the
members' liability. members' liability.

Formation of a Limited CompanyFormation of a Limited Company
Public limited company (PLC)Public limited company (PLC) –. –.
The company's shares may be offered for sale to The company's shares may be offered for sale to
the general public and members' liability is the general public and members' liability is
limited to the amount unpaid on shares held by limited to the amount unpaid on shares held by
them.them.

Formation of a Limited CompanyFormation of a Limited Company
Ready-made companies are available from Ready-made companies are available from
company formation agents, these companies company formation agents, these companies
are available to the public through various are available to the public through various
media and information sites and this is media and information sites and this is
relatively simple to put into operation.relatively simple to put into operation.

Formation of a Limited CompanyFormation of a Limited Company
However incorporating a company yourself means you However incorporating a company yourself means you
will need to send the following documents, together will need to send the following documents, together
with a registration to the Registrar of Companies:with a registration to the Registrar of Companies:
•A memorandum of association.A memorandum of association.
•Articles of association (except in some specific Articles of association (except in some specific
circumstances; ref; - Companies House).circumstances; ref; - Companies House).
•Companies House formsCompanies House forms
•Form 10Form 10
•Form 12Form 12

The Memorandum of AssociationThe Memorandum of Association
This document sets out:This document sets out:
··The company's name.The company's name.
··Where the registered office of the company Where the registered office of the company
is situated (in England, Wales or Scotland).is situated (in England, Wales or Scotland).
··What it will do (its objects). The object of a What it will do (its objects). The object of a
company may simply be to carry on business company may simply be to carry on business
as a general commercial company.as a general commercial company.

The Memorandum of AssociationThe Memorandum of Association
Other clauses to be included in the memorandum Other clauses to be included in the memorandum
depend on the type of company being incorporated. depend on the type of company being incorporated.
The form of memorandum for each type of company is The form of memorandum for each type of company is
set out in a set of tables called The Companies set out in a set of tables called The Companies
Regulations, 1985. Regulations, 1985.
Each subscriber in front of a witness who must attest the Each subscriber in front of a witness who must attest the
signature must sign the company’s memorandum signature must sign the company’s memorandum
delivered to the Registrar. delivered to the Registrar.

Articles of AssociationArticles of Association
This document sets out the rules for the running This document sets out the rules for the running
of the company's internal affairs. Companies of the company's internal affairs. Companies
House provides model articles. A company House provides model articles. A company
may adopt the whole of the model reference as may adopt the whole of the model reference as
its articles or any part of it. its articles or any part of it.

Form 10 Form 10
This form gives details of the first director(s), This form gives details of the first director(s),
secretary and the intended address of the secretary and the intended address of the
registered officeregistered office. As well as their names and . As well as their names and
addresses, the company's directors must give addresses, the company's directors must give
their date of birth, occupation and details of their date of birth, occupation and details of
other directorships they have held within the other directorships they have held within the
last five years. Each officer appointed and last five years. Each officer appointed and
each subscriber (or their agent) must sign and each subscriber (or their agent) must sign and
date the form. date the form.

The Registered OfficeThe Registered Office
It is the address of a company to which It is the address of a company to which
Companies House letters and reminders will be Companies House letters and reminders will be
sent. The registered office can be anywhere in sent. The registered office can be anywhere in
England and Wales (or Scotland if your England and Wales (or Scotland if your
company is registered there).company is registered there). The registered The registered
office must always be an effective address for office must always be an effective address for
delivering documents to the company. delivering documents to the company.
If a company changes its registered office address If a company changes its registered office address
after incorporation, the new address must be after incorporation, the new address must be
notified to Companies House on Form 287. notified to Companies House on Form 287.

Appointed OfficersAppointed Officers
Every company must have formally appointed company Every company must have formally appointed company
officers at all times. officers at all times.
A private company must have at least: A private company must have at least:
One director - but the company's articles of One director - but the company's articles of
association may require more than oneassociation may require more than one
One secretary - formal qualifications are not required. One secretary - formal qualifications are not required.
A company's sole director cannot also be the A company's sole director cannot also be the
company secretary. company secretary.

Appointed OfficersAppointed Officers
A public company must have at least: A public company must have at least:
Two directors; Two directors;
One secretary - formally qualified. One secretary - formally qualified.
All company officers have wide All company officers have wide
responsibilities in law.responsibilities in law.

Appointed OfficersAppointed Officers
After incorporation, you must tell Companies House After incorporation, you must tell Companies House
about: about:
The appointment of a new officer - use Form 288a; The appointment of a new officer - use Form 288a;
An officer's resignation from the company - use An officer's resignation from the company - use
Form 288b;Form 288b;
Changes in an officer's name or address or any of Changes in an officer's name or address or any of
the other details originally registered on Form 10 - the other details originally registered on Form 10 -
use Form 288c. use Form 288c.

Company DirectorshipCompany Directorship
General exemptions: General exemptions:
Where you are an Where you are an un-discharged bankrupt or un-discharged bankrupt or
disqualified by a court from holding a disqualified by a court from holding a
directorshipdirectorship, unless given leave to act in respect of a , unless given leave to act in respect of a
particular company or companies; particular company or companies;
In the case of plc's or their subsidiaries, you are In the case of plc's or their subsidiaries, you are over over
70 years of age70 years of age or reach 70 years of age while in or reach 70 years of age while in
office, unless you are appointed or re-appointed by office, unless you are appointed or re-appointed by
resolution of the company in general meeting of resolution of the company in general meeting of
which special notice has been given. which special notice has been given.

Form 12Form 12
Form 12 is a statutory declaration of Form 12 is a statutory declaration of
compliance with all the legal requirementscompliance with all the legal requirements
relating to the incorporation of a company. It relating to the incorporation of a company. It
must be signed by a must be signed by a solicitorsolicitor who is forming who is forming
the company, or by one of the people named the company, or by one of the people named
as a director or company secretary on Form as a director or company secretary on Form
10. 10.

Company NamesCompany Names
The registration of the company name is controlled The registration of the company name is controlled
by Companies House to avoid duplication, offence by Companies House to avoid duplication, offence
and misrepresentation. and misrepresentation.
In addition certain constraints are also in place to avoid In addition certain constraints are also in place to avoid
infringement of patent or property. It is also infringement of patent or property. It is also
important to check whether the chosen name is important to check whether the chosen name is
similar to any other names already on the register. If similar to any other names already on the register. If
your chosen name is too similar to another name, an your chosen name is too similar to another name, an
objection can be brought to the Secretary of State.objection can be brought to the Secretary of State.

28/06/1128/06/11
BTEC Higher National in Motor Vehicle BTEC Higher National in Motor Vehicle
Management & Technology. Unit Management & Technology. Unit
2.Managing Resources2.Managing Resources 183183
Group Assignment TasksGroup Assignment Tasks
Prepare tasks 3 and 4 as instructed on your Prepare tasks 3 and 4 as instructed on your
assignment sheetassignment sheet
Time allowed: 4 hoursTime allowed: 4 hours
A final draft of all tasks should be handed in by A final draft of all tasks should be handed in by
the date specified in your schedulethe date specified in your schedule

1.physical resources (2005.6) (1)

About This Presentation

Slide Content

Tags

Categories

Download

Quick Actions

Statistics

Related Slideshows

1.physical resources (2005.6) (1)

About This Presentation

Slide Content

Slide 1

Slide 2

Slide 3

Slide 4

Slide 5

Slide 6

Slide 7

Slide 8

Slide 9

Slide 10

Slide 11

Slide 12

Slide 13

Slide 14

Slide 15

Slide 16

Slide 17

Slide 18

Slide 19

Slide 20

Slide 21

Slide 22

Slide 23

Slide 24

Slide 25

Slide 26

Slide 27

Slide 28

Slide 29

Slide 30

Slide 31

Slide 32

Slide 33

Slide 34

Slide 35

Slide 36

Slide 37

Slide 38

Slide 39

Slide 40

Slide 41

Slide 42

Slide 43

Slide 44

Slide 45

Slide 46

Slide 47

Slide 48

Slide 49

Slide 50

Slide 51

Slide 52

Slide 53

Slide 54

Slide 55

Slide 56

Slide 57

Slide 58

Slide 59

Slide 60

Slide 61

Slide 62

Slide 63

Slide 64

Slide 65

Slide 66

Slide 67

Slide 68

Slide 69

Slide 70

Slide 71

Slide 72

Slide 73

Slide 74

Slide 75

Slide 76

Slide 77