Sign In
Not register? Register Now!
Essay Available:
Pages:
5 pages/β‰ˆ1375 words
Sources:
5 Sources
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Research Paper
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 31.59
Topic:

Case Assignment (De La Portilla) Investments & Portfolios

Research Paper Instructions:

CASE ASSIGNMENT
In 5 to 8 pages, write a report based on the following scenario:
de la Portilla food stores, a family owned grocery store chain
headquartered in Refugio, Texas, is considering a major expansion.
The proposed expansion would require de la Portilla to raise $80
million in additional capital. Because de la Portilla currently has a debt
ratio of 50 percent, and because the family members have all their
funds tied up in the business, the owners cannot supply any
additional equity. So the company will have to sell shares of the
company to the public. However, the family wants to insure they retain
control of the company. This would be de la Portilla’s first stock sale,
and the owners are not sure just what would be involved. Therefore,
they have asked you to research the process and to help them decide
exactly how to raise the needed capital. In doing so, you should
answer the following questions:
1. What are the advantages to de la Portilla to finance with shares
rather than bonds? What are the disadvantages of using
shares?
2. Are the shares of de la Portilla food stores currently publicly
held or privately owned? Would this situation change if the sale
shares were made?
3. What are classified shares (stock)? Would there be any
advantage to de la Portilla of designating the shares currently
outstanding as “founders’ shares”? What type of common
shares should de la Portilla sell to the public to allow the family
to retain control of the business?
4. What does the term going public mean? What would be the
advantages to the de la Portilla family of having the firm go
public? What would be the disadvantages?
5. What does the term listed stock mean? Do you believe de la
Portilla shares would be listed shortly after the company goes
public? If not, where would the shares trade?
Writing Guidelines:
Title page and reference page (not included in the 5 – 8 page
count)
Must be double-spaced with 1-inch margins and typed in
12-point Times New Roman
Paper should be proofread for spelling and grammar mistakes.
Paper should be in APA style.
You must cite and reference all texts used, including page
numbers to avoid plagiarism.
Your paper must have an introduction and conclusion
paragraphs.
You should use headings and subheadings to organize your
paper.
Use at least 5 scholarly or professional practitioner sources in
your paper.

Research Paper Sample Content Preview:

Case Assignment (De La Portilla) Investments & Portfolios
Student’s Name
Institutional Affiliation
Case Assignment (De La Portilla) Investments & Portfolios
Financing a business may require that the company enters into a debt agreement to source funds for financing its operations. The business may opt for debts with the goal of minimizing dilution in business control while at the same time keeping the business operational. When sourcing funds for investment, De La Portilla may opt for shares (also called stocks) or bonds to enable the business run its operations. Each of these options has advantages and limitations that the owners of the firm will have to incur. This paper analyzes the risks and benefits of De La Portilla going public through the use of shares. It is advisable that De La Portilla opts for shares, in spite of the fact that there are some limitations associated with this option.
Advantages and Disadvantages of Selling Stocks over Bonds to Finance De La Portilla
Stocks are stakes of ownership in a business. On the other hand, bonds are debts that the business will have to pay in future. When De La Portilla decides to sell stocks to finance its business, it implies that the shareholders have a claim in the company’s proceeds. Shareholders are entitled to the profits, even though this is not a liability to the firm as it does not have to pay debts. The advantage of selling shares is that it is a less risky investment as the company does not have to pay back the debt to shareholders. Instead, the business will only pay them in terms of dividends at an agreed rate within a specified time. This is an advantage compared to using bonds where the business is entitled to pay debts that accumulate interest rates.
Another advantage associated with the sale of stocks is the shared risk between the firm and its shareholders. Bonds do not have room for shared risk as the owner claims responsibility for all losses and has to pay the debt as an individual. With stocks, he owner of the business does not have to pay shareholders in case the business suffers losses. Even though the business owner can be sued for mismanaging the firm, all the risks incurred by the business are shared accordingly. This is also advantageous for the firm as it reduces the risks of the owner suffering losses in case the business goes bankrupt.
In spite of the above advantages, De La Portilla’s owners have to take into consideration the risks associated with selling stocks. One of the primary disadvantages is that the business losses the stake of ownership to external shareholders. When the shareholders claim stakes in business, it implies that the owner has lost full ownership to external shareholders. This is a disadvantage as the owner does not enjoy the business proceeds alone. According to Fabozzi, Jones, Johnson, and Drake (2011), giving out a lot of ownership is frustrating, especially when the owner of the business is the one putting a lot of energy and resources into the business. The owner has to share the profits with the shareholders, in spite of the fact that he is the one working hard to keep the business operational.
The disadvantage of opening books to the public is another limitation. Considerin...
Updated on
Get the Whole Paper!
Not exactly what you need?
Do you need a custom essay? Order right now:
Order

πŸ‘€ Other Visitors are Viewing These APA Research Paper Samples:

HIRE A WRITER FROM $11.95 / PAGE
ORDER WITH 15% DISCOUNT!
Order Now