The last few years have been difficult
economically but the owners of Johnsons P/L, a medium-sized...

Question

The last few years have been difficult
economically but the owners of Johnsons P/L, a medium-sized manufacturer of
quality dining furniture is keen to grow the business. They have seen an
increase in demand for their products from overseas and feel that they will
need to increase their operation in order to continue to meet this demand. They
are currently looking at a number of options to finance this expansion such as
through debt and through equity raising (meaning they will need to “go
public”). They have determined that they need to raise $60 million.

Giving consideration to the various options,
you have been requested to advise the owners of Johnsons what the various
options are, outlining the positives and negatives of each.

Required: write a report (should be
extensive) to the owners detailing ALL the different options and considerations
that you feel the owners should consider raising the $60 million.

Robert · Accepted Answer

Options for Financing 
Introduction 
Johnsons P/L is a medium-size manufacturer of quality dining furniture and is a growing 
company. The company is observing increase in demand from international markets and thus 
they need to increase their operation in order to meet increased demand. The company wants to 
raise $60 million either by way of debt or equity. 
Generally, there are two methods in which a company can fund any new investment or increase 
its current operations. These are debt financing and equity financing. The company starts project 
with funds contributed by their friends, family and people close to company. They provide funds 
in exchange of ownership in form of stock. These shares are known as common stock and 
represent owner’s capital. It is most regularly used method of floating capital for growth and 
expansion. The business extension or improved research and development program can be 
funded by debt funds also.

The last few years have been difficult economically but the owners of Johnsons P/L, a medium-sized manufacturer of quality dining furniture is keen to grow the business. They have seen an increase in...

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