Sainsbury Plc Essay Example | Topics and Well Written Essays - 2500 words

Sainsbury Plc - Essay simulationThe ratio signifies that in the first yr the firm has used around 58 % long end point borrowing. However, it was reduced in the next year because the equity portion increased to a higher level. It is manifest from the Table 1 that all components of equity portion have increased substantially in the year 2008.Factoring is a method of short term funding whereby a firm sells its trade debts at a discount to a monetary institution (Lajoux 2004). It is a continuous arrangement between a financial institution (namely the factor) and a company (namely the node) which sells goods and services to trade customers on credit. As per this arrangement, the factor purchases the clients trade debts including answer for receivables either with or without recourse to the client, and thus, exercise control all over the credit extended to the customers and administers the sales script of hi client. The client is immediately paid a sizeable portion of the trade d ebts taken over and when the trade customers repay their dues, the factor will make the remaining payment. To put in simple language, a factor is an agent who collects the dues of hi client for a certain fee. Factoring offers a number of benefits to a client. In many cases cipher is found to be a more appropriate mode of financing than banks. Some of the benefits are briefed belowThe first and foremost service offered by a factor to its client is that it offers an off balance sheet financing arrangement. By collecting receivables of the clients, factor provides them with a means of pay without bothering about the procedures and troubles of usual financing arrangement. Factoring allows firms to manage the hard cash flow more efficiently. It does not indispensability to wait for the realization of debtors/receivable to find cash flows to pay off various obligations and cash needs. Therefore, cash position/working capital position empennage be made sound and stern. The efforts of collection of receivables can be canalized to some other areas and thereby organizations efficiency can be improved.In the absence of factoring arrangement, the insecurity of non-payment should have been borne by the client itself. Thus, factoring is also a kind of insurance whereby the risk of loss or non payment by debtors will be shared with factor(s)Apart from being a financier, a factor provides the client with the management and maintaining ledger of debtorsA number of consultancy services such as assessing he credit worthiness of clients customers, ascertain their track record are also offered by factor. In addition to the direct benefits from a factor, the clients are benefited many other indirect trade benefits such as increased working capital position liquidity bargaining power and trustworthiness among customers and public at large. 3. Control of working capital has always been thought to be the most important factor in the short-term financial management of companies. In what sense your