Sainsbury Plc Essay Example | Topics and Well Written Essays - 2500 words

Sainsbury Plc - Essay ExampleThe ratio signifies that in the first year the bulletproof has used virtually 58 % long term borrowing. However, it was reduced in the next year because the equity portion increased to a higher level. It is evident from the Table 1 that all components of equity portion take a crap increased substantially in the year 2008. calculateisation is a method of short term financing whereby a firm sells its trade debts at a discount to a financial institution (Lajoux 2004). It is a continuous arrangement between a financial institution (namely the factor) and a company (namely the client) which sells goods and services to trade customers on deferred payment. As per this arrangement, the factor purchases the clients trade debts including account receivables either with or without recourse to the client, and thus, exercise control over the doctrine extended to the customers and administers the sales ledger of hi client. The client is immediately paid a sizeabl e portion of the trade debts taken over and when the trade customers take back their dues, the factor will make the remaining payment. To put in simple language, a factor is an agent who collects the dues of hi client for a certain fee. Factoring offers a number of benefits to a client. In many cases factoring is found to be a more appropriate mode of financing than banks. Some of the benefits argon briefed belowThe first and foremost service offered by a factor to its client is that it offers an off balance sheet financing arrangement. By collecting receivables of the clients, factor provides them with a means of finance without bothering about the procedures and troubles of usual financing arrangement. Factoring allows firms to manage the cash flow more efficiently. It does not need to wait for the identification of debtors/receivable to find cash flows to pay off various obligations and cash needs. Therefore, cash position/works capital position can be make sound and stern. The efforts of collection of receivables can be canalized to some other areas and thereby organizations efficiency can be improved.In the absence of factoring arrangement, the risk of non-payment should have been borne by the client itself. Thus, factoring is also a kind of insurance whereby the risk of loss or non payment by debtors will be shared out with factor(s)Apart from being a financier, a factor provides the client with the management and maintaining ledger of debtorsA number of consultancy services such as assessing he credit worthiness of clients customers, ascertain their track record are also offered by factor. In addition to the direct benefits from a factor, the clients are benefited many other collateral trade benefits such as increased working capital position liquidity bargaining power and trustworthiness among customers and public at large. 3. Control of working capital has always been thought to be the most important factor in the short-term financial management of companies. In what sense your