Financial_Management

Financial_Management - FINANCIAL MANAGEMENT 2007 Financial...

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FINANCIAL MANAGEMENT 2007
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Financial Management Financing Sources of Construction Companies 1. Introduction 1.1 Financing in Construction Companies At any stage of business growth, a firm always needs a sum of money to finance their operation and expansion. Businesses at any size like McDonald’s, Marks and Spencer, Unilever, and Debenhams, for instances, must require a huge amount of money to finance their expansion into other parts of the world. Similarly, the situation also happens at construction companies in the UK that also require extra money to finance their operation and possibly acquisition of supporting subsidiaries (Table 1). Table 1 Costs at Construction Companies Costs Cost category Note Raw materials Variable Cost of materials increases as the production increases Energy Variable Offices and plants will utilize more energy to produce more outputs Personnel (direct labor) Variable Increased productivity results in increasing number of personnel Personnel (indirect labor) Mixed The size of administrative personnel does not change so much when production increases except it raises significantly Office/plant rent Fixed The plant rent is fixed for a given period Policy costs (advertising, R&D, retention) Fixed or Mixed Discretionary costs (Piana, 2003) In addition, corporations in the construction industry cannot sustain their business growth without additional capital that may come from private equity firms, long-term debts, JAN. 24, 2007 2
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Financial Management and internal sources like stakeholders and previous years’ operating profits. Therefore, paying attention to different kinds of costs in the construction industry is important since the industry is prone to cash shortage and to boost the profit margin for stakeholders. 1.2. Stages of Growth Concerning the financing in construction companies, this paper will elaborate several practices of financing those companies in the UK perform. However, since financing composes of several stages, this paper will only consider the financing at the growth stage by comparing financing practices in four companies; they are Carillion plc, Marshalls plc, Kier Group plc, and George Wimpey UK Ltd.
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This note was uploaded on 03/02/2011 for the course BUS 500 taught by Professor Dr.spitz during the Spring '11 term at Deep Springs.

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Financial_Management - FINANCIAL MANAGEMENT 2007 Financial...

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