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1 Ai

The document discusses the importance of working capital for a business, highlighting that while high working capital can prevent cash flow issues, excessive amounts may indicate inefficiency. It outlines barriers faced by an entrepreneur, such as lack of finance and record-keeping, which can hinder decision-making and customer satisfaction. Additionally, it analyzes the implications of accepting an investment offer, weighing the benefits of market entry against potential loss of control and profit sharing.

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ekemaankhan2009
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32 views1 page

1 Ai

The document discusses the importance of working capital for a business, highlighting that while high working capital can prevent cash flow issues, excessive amounts may indicate inefficiency. It outlines barriers faced by an entrepreneur, such as lack of finance and record-keeping, which can hinder decision-making and customer satisfaction. Additionally, it analyzes the implications of accepting an investment offer, weighing the benefits of market entry against potential loss of control and profit sharing.

Uploaded by

ekemaankhan2009
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

1ai) Commanding.

1aii) The amount of cash available for the day-to-day expenses. High working capital indicates that the
business can pay its debts, avoiding cash flow problems. But too much working capital may indicate the
resources not being used efficiently and can lower profits as opportunities are not being utilized.

1bii) Holding inventory will cost SW a storage cost. The more inventory that is held the extra need to be
taken care of to avoid the damage to the raw materials.

c) Entrepreneurs is an individual who has an idea to start a business, starts it up, carries most of the risk
but rewards of the business.

One of the barriers, that may have been faced by SW would be lack of finance. Because of lack of
finance SW would have little working capital. This can have an impact on the credit offered to the
customers, amount of inventory held and delay in payments to the local manufacturer resulting in low
discounts. The consequence of this would be less customers may buy from SW because of low credit
offered to them, and low in inventory levels may result in not being able to fulfill customers' demands
resulting in loss of sales.

Another barrier to entrepreneurship that may have been faced by Samira would be lack of record
keeping. Because of this Samira have less accurate data about her business. This can impact on the
decisions made by Samira for her business, inaccurate sales data or profits and missing database can
lead to wrong decisions and may have to incur the bad consequences of SW's decisions.

d) If Sara accepts Lara's offer, this will enable Samira to enter the market first. Because SW will now be
able to control the production process and can produce more units. This can impact the quality of the
whiteboards, SW can produce high quality products and meet the customers' demands. This will
increase the sales of SW making SW the market leader. However, Lara will own 40% of SW, this can
reduce the control of Samira over her business. And profits will be shared leaving lesser profits to be
invested back into SW to expand the operations of SW.

If Samira does not accept the offer of Lara, Samira will lose her customers to OS. Because Samira can
only produce limited number of whiteboards leading to customers going to OS to fulfill their demands.
This can decrease the sales of SW and can lead to lower profits. Therefore, SW should apply for a long
term bank loan to purchase a production facility to enter the market before OS.

But the decision to accept Lara's offer depends on the

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