Financial risk Essay
Wheatfield’s Limited is a private Limited company. This means that it is in the private sector of the economy owned by individuals (shareholders) who want to make a profit, therefore the business is not owned by the government. The main aims of the business will include making a profit, survival and possibly expanding. Limited companies are more expensive to set up but they do carry less of a financial risk. The business is owned by shareholders, these are people who have invested their money into the business.
They could be ordinary shareholders and have a vote in how the company is run at the Annual General Meeting or preference share holders who have no vote in the AGM but are paid their dividend before other shareholders. In this case the shareholders must be members of the family. The business has an Articles and memorandum of Association. These are legal documents required with setting up a company and they must be registered with the Registrar of Companies. They contain details of the company’s planned activities and internal organisation.
It has a certificate of incorporation which is a legal document that allows the business to trade legally. The Wheatfield’s Ltd Company has limited liability
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Advantages of a business such as Wheatfield’s are that it has limited liability and it is incorporated, the shareholders are not putting themselves and any of their personal possessions at any risk. Having shareholders owning a company is also an advantage of this type of business. As shares are sold it is a lot easier to raise liquid capital. Disadvantages of Wheatfield’s are the fact that all the profit made within in the company has to be shared between the shareholders. It is very difficult to set up this type of business because of all the legal documentation that has to be processed; it takes up a lot of money and time.
Also a company by law must publish its accounts. This isn’t the case with sole traders and partnerships The main objectives of a business such as Wheatfield’s Ltd are to make a profit, survive, expand and get a good reputation. The business was founded in 1936 which is 67 years in business and it was then a main aim to survive, it has done so successfully by 1968. This was when the primary industry diversified and expanded. This is usually a short term objective as they do not want to lose business in the first few years.
If things were bad then they would have a higher competition from similar businesses or a health scare such as BSE. In order to make a profit they needed to expand, which is what they done successfully, diversifying. They made 1 farm to become 4 which they can grow crops on to increase their income and also they opened up a local restaurant and other activities within their community to not only make a profit but to expand the business too. Wheatfield’s needed to create a good reputation, and to be well known in the area.
There is evidence of this by them organising annual charity events, local tes, providing jobs for people and housing for workers. They also have good links with the local agricultural college. Wheatfield’s is mainly a primary industry in the primary sector because it is involved in the extraction of raw materials. These are jobs such as mining and farming. These jobs are generally hard work, boring and don’t earn a lot of money. Modern industry has found alternatives to natural resources, causing loss of jobs in this industry. The U. K have been importing goods from other countries, making the demand lower for these natural resources in our country.
Wheatfield’s is involved in arable farming and the production of powdered milk. In the U. K there are other sectors that are more popular than the primary industry. These are secondary and tertiary industries. In the secondary industry people work manufacturing, building and providing components. These are jobs such as construction and engineering. These jobs are not as popular as they used to be because of automation. Machines are replacing a lot of people; also the demand for foreign goods is often higher than that of U. K goods.
People tend to go for more pleasant jobs, in the tertiary sector, working in places like cinemas, hospitals etc. these jobs tend to pay a higher salary and work in better environments. More people are working in this sector and they are receiving a higher disposable income and can afford to spend their money in shops, cinemas and restaurants. The primary industries have declined because many natural resources have become scarce.
Natural resources are often imported into the U. K from overseas. Modern industry has found alternatives to natural resources e. g. nuclear energy. Wheatfield’s has a much better chance of continuing in business than a coal mine because farming provides the bare necessities like crops, dairy products for the population and now coal is being substituted by other natural resources that are easier to use like gas and electricity. Wheatfield’s has diversified since they began to trade because they want to offer products to the community such as a restaurant, a museum, car boot sales, caravan rallies and more. This will not only give them a better reputation but will also increase their profit.
The business wants to move from the primary sector, because it is declining, into the tertiary where jobs are more popular and people are making more profit. This will help expand the business, providing better services to the local community. When deciding on a location for the farm the farmer would take into account several factors. When buying land for a farm, it needs to be at a reasonable price in a prime area. The farmer will settle for good land, which is suitable for his farming and is available within his budget. He will try to buy for a little as possible.
The land the farmer will want to buy should be of a high standard, with rich, fertile soils that are suitable for growing crops on and/or keeping animals. The farmer will want the suppliers to be quite near to the farm, preferably within driving distance. As long as he can drive to them, it should be suitable. He will need suppliers that sell fertilisers, animal feed, machinery and other products. The farmer will need nearby roads for getting in and out of the area, getting to and from suppliers, or suppliers delivering to him.
He won’t want to be too far from the town centre, factories to process crops and animal markets either, from potential customers if he wants to sell his crops and/or animals. The land should be of a suitable infrastructure, stable enough for growing crops, building accommodation, partitioning off for controlled growth of plants/vegetables/fruits. All businesses have two types of stakeholders. A stakeholder is and individual or a group who affects or is affected by the business activity. Internal stakeholders are people or groups involved with the business, whereas external stakeholders are people or groups outside of the business.
The internal stakeholders of Wheatfield’s are the Munro family and the business employees. The external stakeholders are the local community, business suppliers, customers, and the farmers union The Munro family have an obvious interest in the business for it to expand and make a profit. The business employees have an interest in the business, to earn as much money as possible and to provide a good service to the community. They acquire accommodation and financial support for house purchase. The local community have an interest in the business because the new farm would be a source of employment.
The suppliers have an interest in the farm for it to expand, so that they can make more money from their customer. Customers have an interest in the farm. They need to be able to trust the Munro family to meet deadlines for deliveries. Meeting the customer’s expectations will keep them in business. Within most businesses, there is conflict between internal and external stakeholders. In this case there would be several conflicts, some of which are; The Munro family and the business employees.
They will want to make as much profit for themselves as possible, but the employees will want higher salaries, if there is more money coming into the business. Also the Munro family will want to buy the cheapest stock for his business, the business suppliers will be losing money. If Wheatfield’s was to go bankrupt then the suppliers would lose a customer, leading to them losing money. One final example would be the fact that The Munro family and the local community will have a conflict about the fact that the farmers may be using chemical fertilizers. They could damage the local environment.