A group of close friends, Aragorn, Gandalf and Bilbo have decided to pursue their passion to develop
Fantastic news! We've Found the answer you've been seeking!
Question:
A group of close friends, Aragorn, Gandalf and Bilbo have decided to pursue their passion to develop an agricultural business focusing on a vegetable plantation. They have managed to secure sufficient capital to commence the project with a small piece of land in the outskirts of Selangor. Within the first three years, they were successful in boosting the productivity of their plantation and were able to generate substantial net profits amounting to RM2 million. Aragorn is an agricultural science major and developed a breakthrough water irrigation technology that substantially reduced the costs of the watering process of the vegetation. In the fourth year of the business, they have decided to expand their business by investing heavily in research and development initiatives that could further boost the productivity of their existing land. Furthermore, they are particularly concerned with their working capital and cash timing problems that are likely to occur as they embark on their expansion plans. Gandalf, a chemical engineer major had recently reviewed a paragraph in a business magazine that stated as follows: "Commercial banks and investment banks play complementary roles in stimulating the growth of an economy. They share the common goal of assisting businesses in the economy to acquire capital, as well as channeling funds from savers to borrowers. However, stark differences are evident between these entities. In the current climate, businesses have other alternatives to pursue acquiring capital, specifically for small and medium enterprises in Malaysia." "Commercial banks and investment banks play complementary roles in stimulating the growth of an economy. They share the common goal of assisting businesses in the economy to acquire capital, as well as channelling funds from savers to borrowers. However, stark differences are evident between these entities. In the current climate, businesses have other alternatives to pursue acquiring capital, specifically for small and medium enterprises in Malaysia." The next day, Aragorn, Gandalf and Bilbo engaged a financial advisor, to obtain further clarification on the paragraph stipulated above and improve their comprehension of the Malaysian financial system. By assuming the role of the financial advisor, you are required to address all the concerns that have been highlighted as illustrated below:
a) Based on the magazine article above, the close friends were uncertain about the differences between commercial banks and investment banks, particularly concerning their functions and procedures in assisting businesses to acquire capital. As the financial advisor, explain the differences to elevate their knowledge of these institutions.
b) Another ambiguous statement that required clarification by Gandalf was the notion that small and medium enterprises (SMEs) in Malaysia was able to pursue other alternative sources of funding, as opposed to merely relying on commercial banks. As the financial planner, elucidate the options available for SMEs today if the company intends to expand its services abroad and has immense growth potential.
Related Book For
Fundamental Accounting Principles Volume 1
ISBN: 9781259259807
15th Canadian edition
Authors: Kermit Larson, Tilly Jensen, Heidi Dieckmann
Posted Date: