Case Study 1

Billy Brown, a sole trader has just commenced his restaurant business. He approached you (a financial advisor) in relation to the options he has in relation to sources of finance and risk management strategies for his business. Below are some questions that he has asked you during the consultation. Billy has requested for a professional report providing him with the following information.

1. Suggest 2 (two) alternative short term finance options and provide at least 1 (one) advantage and 1 (one) disadvantage of each finance source to keep his business running.

2.Billy is considering purchasing commercial equipment costing $175,000 at 7% over 10 years (compounded annually). During the discussions with you, he has requested that you advise him on the future cash flows, detailing the principal, interest payment and amount owing each year for the duration of 10 years. You should provide him a worksheet attached with the report.

3.During the discussion, Billy has also asked you about entering into a lease agreement instead of obtaining of commercial loan from the bank to finance the commercial equipment. Compare the 2 sources of finance and provide at least 2 differences and provide a recommendation of which is the better option.

4.Billy is concerned about business risks as he has heard about many small businesses which collapsed due to the pandemic that happened 2 years ago. He asked you for advice on how he can manage his risks. Provide 2 business risks that he may face and how he can mitigate such risks.

5.In your report, please also provide the rights and obligations of a financial advisor in accordance to the legislation. Do your research on the compliance required and provide the website link in your response.