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BTEC Business Level 3 Unit 2 P4
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BTEC Business Level 3 Unit 2 P4
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BTEC Level 3 Unit 2 P4Describe sources of internal and external finance for a selected business -
topshop
Topshop uses the following internal sources of finance:
Personal Savings: Sir Philip Green owns a group of retail businesses called
Arcadia. He founded Topshop in 2002. He used his personal savings, his own
money, which he invested within the business, he was the original founder of
Topshop. This meant he would not have to pay interest from borrowing money
from the bank.
Retained profits: These are the profits within the organization, which have been
retained in the past and not given to the founders in the form of either profit or
dividends. Topshop use this internal source so that they don’t have to pay
interest to an outside lender and they don’t have to include outside investors.
Due to Topshop now being a well established business they have retained
profits. This allows them to purchase new physical and technological resources
such as software updates and new software including new ways to purchase
items such as iPads for scanning items at tills and technologically savvy software,
which allows Topshop to grow at the same rate as the other leading retail
brands. And it means they can do this without taking a bank loan on which they
would have to pay interest.
Bank loans and debts: They tried to keep all loans and debts to do with financing
the business within their group Arcadia and with their shareholders. They did
borrow some loans from the bank but they have now sorted these out and are in
positive cash. Mr Philip Green is a shareholder and it is held within Arcadia
group, with intra group loans which is a source of internal financing
Sale of fixed assets: Topshop sold various premises when they weren’t in
demand anymore or they were not in the right location.They can sell any
buildings at anytime if necessary which means that if they needed to get liquid
cash fast they could do so by selling any of their properties.
Topshop uses the following external sources of finance:
Bank overdraft: TOPSHOP/TOPMAN business is now valued at Two Billion
Pounds (£2,000,000,000). They now have no bank debt and they are in positive
cash. Due to them being debt free allows the flexibility and balance sheet to look
at other opportunities to acquire either by themselves or in the partnership with
LGP wh retain a lot of capitail in their new fund.
Venture capitalists: Topshop used venture capitalists a few years ago, they
recently did a private equity deal which was an external source of finance which
was resulted in private equity shareholders owning around 25% of the retail
group, Arcadia the parent company of Topshop he sold this to an American
private equity firm Leonard Green & Partners which co-owns J- Crew brand, this
was for around $805 million. However the private equity firm have now become
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