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physical resources (2005.6) (1) physical resources (2005.6) (1) Presentation Transcript

  • BTEC HIGHER NATIONALS MOTOR VEHICLE MANAGEMENT AND TECHNOLOGY
  • 28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Introductions Name Job Experience Other Interests etc
  • UNIT 2: MANAGING RESOURCES
  • Managing Resources: learning outcomes
    • I nvestigate the use of Physical Resources
    • Critical Factors affecting selection and use
    • Planning, Monitor & Control of physical resources
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • What is the importance of good management?
    • Show video presentation
    • Soap Opera
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources With Gerry Robinson
  • 28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Activity
    • Using a paper sheet develop a left and right column of good vs. bad traits of a manager.
    • Say 10 minutes?
    • We will then discuss
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Strategic or Operational?
    • From your key points let us decide where they fit within the following?
    • Operational control
    • Managerial control
    • Strategic planning
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Operational control
    • Routine programmed actions
    • Closed systems requiring a performance to be measurable
    • Information available to aid control
    • Short term
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Managerial control
    • Regular but more formal and central to policy
    • Information less available decision-making more central to forecasting
    • Perspective is one of business units as opposed to departments
    • Medium-term
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Strategic planning
    • Irregular and non-routine
    • Little proven or evaluated market information available
    • Open decision-making systems (no effective data response)
    • No effective data available
    • Longer-term
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Management theories
    • Classical to scientific management
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Frederick Winslow Taylor (1856-1915 ) Henry Ford (1863-1947) Henri Fayol 1841-1925
  • Classical Management: a brief Introduction
    • Born into a wealthy Philadelphia Quaker family in 1856, Taylor became an apprentice machinist in a firm of engineers before joining the Midvale Steel Company in 1878, where he developed his scientific management ideas.
    • The company manufactured locomotive wheels and axles, and it was here that he rose to the position of shop superintendent by 1887. In this role, he observed that workers used different, and mostly inefficient, work methods. He also noticed that few machinists ever worked at the speed of which they were capable, a practice that he labelled systematic soldiering.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Frederick Winslow Taylor (1856-1915)
  • Taylorism
    • Taylor perceived workforces’ operations as ‘systematic soldiering’ and attributed this tendency to deliberately avoid hard work for the following main reasons:
    • The view among the workers that an increase in output would result in redundancies.
    • Poor management controls, which made it easy for them to work slowly in order to protect their own best interests.
    • The choice of methods of work, which was left entirely to the discretion of the workers, who wasted a large part of their efforts using inefficient and untested rules of thumb.
    • As a result Taylor developed ‘Scientific Management’ to overcome this – Standardization. The System not The Man
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Henry Ford
    • By 1920, the name of Henry Ford had became synonymous not only with his Model T motor car but also with his revolutionary techniques of mass production. Ford established his company in 1903. In the 1890s, it was skilled craftsmen who built motor cars. Ford claimed that there were not enough of them to meet the level of car production that he wanted, and that was why, in his view, deskilling of work was necessary.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Henry Ford (1863-1947)
  • Fordism
    • Ford's goal was 'continuous improvement' rather than the 'one best way'.
    • Ford's objective was to increase his control by eliminating uncertainty (Ford and Crowther, 1924).
    • Among his major innovations were:
    • Analysis of jobs using time-and-motion techniques;
    • Installation of single-purpose machine tools to manufacture standardized parts;
    • Introduction of the assembly line.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Henri Fayol
    • Fayol's list of managerial activities provides a definition of management. He is credited with 'inventing' management, as a discrete activity, and defining its constituent elements. Interestingly, the word management is not translatable into all languages, nor does the concept exist in all cultures. Managing of course occurs, but it is not always treated as anything special or separate.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Henri Fayol 1841-1925)
  • Henri Fayol
    • He stressed methods rather than personalities, seeking to present the former in a coherent and relevant scheme. This formed his theory of organization. Unlike Taylor, Fayol focused on the top of the hierarchy and moved downwards. However, like Taylor, he too believed that a manager's work could be reviewed objectively, analysed and treated as a technical process which was subject to certain definite principles which could be taught. Fayol's list of six management activities, originally developed some 80 years ago, remain broadly intact to this day
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Henri Fayol 1841-1925)
  • Henri Fayol – Classical Management Theory
    • Henri Fayol: Engineer and Management Theorist identified six principal business operational categories found within a typical organization:
    • Technical
    • Commercial
    • Financial
    • Security
    • Accounting
    • Management.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Henri Fayol – Classical Management Theory
    • Henri Fayol identified six Management activities:
    • Forecasting – predictions of future events
    • Planning – develop action to meet demand
    • Organizing – combination of all resources and the allocation of responsibilities for department and individual
    • Commanding – the directing of human resources
    • Co-ordinating – synthesizing the efforts
    • Controlling – monitor of progress against plans and implementing corrective actions when appropriate
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Fayol’s general principles
    • Division of labour
    • Authority
    • Discipline
    • Unity in command
    • Scalar principles (line of authority)
    • Unity in direction
    • Individual interest; subordination
    • Remuneration
    • Centralization
    • Order
    • Equity in treatment
    • Employment stability
    • Initiative opportunity
    • Espirit de corps – (promotion of team spirit and effort)
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • OUTCOME 1 Investigate the use of physical resources
  • Investigate the use of physical resources
    • Assess and report the utilisation of different physical resources
    • Describe the critical factors which affect the selection and use of physical resources
    • Produce recommendations for selection and use of physical resources
    • Explain the processes for investigating and recommending the use of physical resources.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1 Physical Resources Within Planning, Control and Monitor Critical Factors Influencing the Selection of Physical Resources
  • 1.1.1.Planning Categories
    • Planning is a management function, which is intended to appraise specific courses of action or activities in pursuit of the organization’s aim. The layers of planning align to the managerial divisions within an organizational structure, but broadly fall into the following categories:
    • ►    Corporate longer-term planning.
    • ►    Operational budgetary planning.
    • ►    Tactical or divisional medium, short-term planning.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.1.1.Planning Categories
    • The corporate and operational planning provides to a greater extent the strategic planning for the organization.
    • This deals chiefly with the development and life of the company and its operating aims.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2. Critical factors
    • The Divisional and tactical planning is the action of developing, implementing, monitoring and controlling specific departmental objectives by departmental management, in order to achieve the strategic aims.
    • The reality of drawing up plans will incur many obstacles and difficulties that the management will be required to overcome.
    • These critical factors are considered as measures of resource within the performance forecasting: a component of the planning process.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2. Critical Factors
    • The principal resource within an organization is its human resource; its people: this organizational topic is dealt with within sections 3 and 4.
    • The focus of this section will be the understanding of physical resources and how to assess their value within the planning and monitor process.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2. Critical factors
    • Forecasting concerns the probability of future events or trends occurring, which will directly or indirectly influence the business, either as an opportunity or threat. From this the management plan will attempt to turn their resources into a strength in dealing with the opportunity as opposed to a threat.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.1.Financial Constraints:
    • The financial health of an organization and its business is paramount. The basic needs for any motor retail business’ financial structure is: provision of working capital; the increase in capital wealth and the cost effective utilization of funds, capital and assets.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.1.Financial Constraints:
    • Essentially the responsibility of financial structure is the domain of the proprietor or board of directors and finance advisor.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.1.Financial Constraints :
    • The accepted method of financial control is through the budgeting system, where a master budget is devised of which each department whether cost or revenue focused is linked as a component part. Diagram 1.1.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.1.Financial Constraints: 28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Financial directive from proprietor or board of directors Business Plan and Operational objectives set for the budgeted financial year. Expressed as a Master Budget Departmental budget Department/Divisional plan and forecast Requirements: Labour Skill Training Equipment Vehicles IT Marketing Requirements: Buildings Services Stock Capital fixtures Investment Growth Profit Diagram 1.1
  • 1.2.1.Financial Constraints:
    • The departmental budget places the financial constraints, effectively the spending capability upon the department.
    • Within the budget process will be an element of flexibility and it is within this area that a manager has the opportunity to develop a business case to support a particular business venture that they believe will grow the profitability of the business.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.2. Competition and Demand:
    • Within the business plan an appropriate assessment of the environment in respect of demand by the population, and the competition to supply the service aligned to your own business.
    • Detailed information of market area customer spend power and vehicle utilisation is available from National statistics data, specialist agencies and marketing experts within motor industry manufacturers and institute organizations.
    • However at a minimum a SWOT analysis should be undertaken to evaluate current and potential business opportunities. Diagram: 1.2.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Diagram 1.2 Competitor Analysis 28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Competition Strengths and weaknesses Name Location Strength Weakness Opportunities Threats                                                                        
  • 1.2.3. Company and Departmental Objectives: Policy
    • The company policy will align the department to its core objectives through the budgetary meeting and agreement processes.
    • The setting of objectives at department level to meet these demands will invoke the appraisal of resources available to delivering the objectives set.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.3. Company and Departmental Objectives: Policy
    • The department budget will most certainly reflect seasonal trends and this will be of particular importance to retail operations within areas of particular public and recreational attraction such as coastal resorts and major route locations.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.3. Company and Departmental Objectives: Policy
    • The physical resources: premises, vehicles and equipment in supporting the primary role of an After-sales retail business will need to be dependable if the staff are to achieve the best customer service and from which the managers thus derive the optimum profitability.
    • Activity: Discuss effective resource requirements
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.4. Legal Requirements:
    • This will entail the consideration of maintenance agreements with regard to the general workshop equipment and the essential consideration of legislative controls of the following:
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.4. Legal Requirements:
    • Health and Safety legislation. Responsibility of the employer may include the following areas depending on national or EU laws:
    • Provide and maintain safe premises , plant and systems of work that are safe and without risk to health or safety.
    • Make provision for the safety and absence of risk to health in connection with the use, handling, storage and transporting of articles and substances ( See Risk Assessment Example in Study Guide)
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.4. Legal Requirements:
    • Provide information, instruction, training and supervision to ensure the health and safety of all its employees
    • Provide a maintenance and working environment which is safe and without risk to health and has adequate facilities and arrangements for the welfare of employees
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.4. Legal Requirements:
    • Health and Safety at Work extends to include the following main equipment types:
      • Vehicle lifts/hoists
      • Jacking beams and hydraulic bench lifts
      • Axle stands
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.4. Legal Requirements:
    • Cranes and hydraulic hoists
    • Chains, chain blocks, slings and other types of mechanical lifting tackle
    • Air receivers
    • Abrasive wheels
    • Respiratory systems
    • Accident recovery systems: including: repair, recovery and first-aid equipment
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.2.5. Performance and Efficiency:
    • At this point we should consider the life and obsolescence of equipment and the related impact of these resources upon the cost of replacement and incurred burden upon projected revenues and business opportunities.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  •   1.2.5. Performance and Efficiency:
    • Group Activity 1.1 – use a paper sheet
    • Working within your groups draw up a SWOT analysis of your own business or a business familiar to you specific to competition and demand within your location.
    • You should consider seasonal influences and physical restrictions that would affect sales and customer perception.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1 Physical Resources Within Planning, Control and Monitor The Process of Physical Resource Assessment and Recommendation
  • 1.3 Introduction
    • Nigel Slack (2001): identifies medium, short-term planning as dealing with planning in detail.
    • A process of looking ahead in a disaggregated manner as the medium term plan concentrates more greatly toward the shorter term.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.3 Introduction
    • This can create a difficult environment from which the departmental manager must make his decisions related to capital expenditure on physical resources. Refer Diagram 1.3.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Balance between planning and control activities long to short-term. Diagram 1.3
    • Long-term planning and control
    • Years/months
    • Uses aggregate demand forecasts
    • Determines resources to an aggregate demand
    • Financially biased objectives
    • Medium-term planning and control
    •   Months/weeks
    • Uses partially aggregate demand forecasts
    • Determines resources and contingencies
    • Objectives combine financial and operational concerns
    • Short-term planning and control
    • Days/hours
    • Uses totally disaggregated forecasts based upon demand
    • Makes interventions to resources to correct deviations from planned objectives
    • Spur of the moment consideration of operational objectives
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources CONTROL Years/months Months/weeks Weeks/days Days/hours PLANNING
  • 1.3.1. Demand
    • The tactical operating management will be able to identify with the instant demands of their environment to take up operating opportunities.
    • Diagram 1.3 identifies the characteristics of the short term planning and medium term planning, specifically 12 months and less.
    • At this level managers will be continually balancing efficiency quality revenue and expenditure in order to control the focus and reduce the negative variance from the budget control.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.3.1. Demand
    • Let us consider a potential Spur of the moment situation.
    • Consider the group activity conducted relating to competitor and environmental SWOT analysis.
    • Let us now consider that a hypothetical opportunity or threat has arisen in the form of recent planning permission for a new office building to house in excess of 3,500 employees whose major commuter route is by road.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.3.1. Demand
    • As a Service Manager you have a limited tyre, exhaust and battery fitting facility and rely upon the Parts Department Manager for your supply of stock, most of which is ordered in because the demand for your services in this sector is only a small component of your current customer base.
    • You believe this largely to be because your current customer base, is largely local with a limited spend value in this service sector.
    • Additionally as a result of local knowledge you benefit from discounted factor components supplied by a local tyre specialist.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.3.1. Demand
    • You have refrained from investing in new equipment centred to this service facility, as the revenue comes from what you consider to be an Independent Demand situation, where planning is very difficult due to fluctuation in customer demand.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.3.1. Demand
    • However within your SWOT analysis you believe you have identified an opportunity to secure additional service work plus an opportunity to control and improve tyre and ancillary sales as an addition to the service work.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 1.3.1. Demand
    • Your decision to consider this opportunity as a Dependent Demand, although has risk attached, is profitable as it is centred to the fact that the new office block is sited literally within walking distance.
    • You believe this benefit of location will provide a governed demand largely as a result of the outsider employees commuting by car to work.
    • In addition, although your main workshop is busy you only measure a 90% efficiency overall for your 10 productive staff and believe that sufficient work from this new opportunity will take up this shortfall in labour efficiency
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Dependent demand 28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources The example here shows the demand for tyres in a car plant is dependent Upon the manufacturer’s production schedule Slack: 1998
  • Independent demand 28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Whereas in the example of tyre sales within the Independent model does not rely on any one single determining factor, but is linked to a whole host of Similar and different sales alike. Slack: 1998
  • Group Assignment Tasks
    • Prepare tasks 1a and 1b as instructed on your assignment sheet
    • Time allowed: 2 hours
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources A final draft of all tasks should be handed in by the date specified in your schedule
  • 28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Applying Costings to Purchase of Resources When purchasing equipment or other resources it is necessary to plan and project the costs of use over a given period. This can be done using methods such as ‘payback period’ (PP) or ‘net present value’ (NPV)
  • Example Payback Period (PP) and Net Present Value (NPV) – using the project values 28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Using PP cost benefit analysis the project returns profit in year 5 Using NPV cost benefit analysis at 10% discount factor the project returns profit in year 6 0 £22,000 £0 -£22,000 1   £1,500 -£20,500 2   £3,500 -£17,000 3   £5,000 -£12,000 4   £10,000 -£2,000 5   £10,000 £8,000 6   £10,000 £18,000 7   £10,000 £28,000 Payback Period Project years Initial outlay Expected cash inflow £'s Revenue £'s NET PRESENT VALUE (NPV) Project years Initial outlay Expected cash inflow £'s Discount factor Projected value of cash inflows £'s NPV adjusted revenue £'s 10% 0 £22,000 £0 1 0 -£22,000.00 1   £1,500 0.909090909 £1,363.64 -£20,636.36 2   £3,500 0.826446281 £2,892.56 -£17,743.80 3   £5,000 0.751314801 £3,756.57 -£13,987.23 4   £10,000 0.683013455 £6,830.13 -£7,157.09 5   £10,000 0.620921323 £6,209.21 -£947.88 6   £10,000 0.56447393 £5,644.74 £4,696.86 7   £10,000 0.513158118 £5,131.58 £9,828.44
  • NPV 28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources EXAMPLE
  • Activity 28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Work out the Net Present Value for each project at the end of its’ life cycle using a discount factor of 10% PROJECT A B C D Investment 15k 18k 10k 18k Year 1 income 7k 6k 5k 4k Year 2 income 4k 6k 5k 5k Year 3 income 3k 6k - 6k Year 4 income 2k 6k - 7k Year 5 income 1k 6k - 8k
  • Activity - Solution 28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources PROJECT A B C D Investment 15k 18k 10k 18k Year 1 - 10% discounted 6.363k 5.454k 4.545k 3.636k Year 2 - 10% discounted 3.304k 4.956k 4.13k 4.13k Year 3 - 10% discounted 2.253k 4.506k - 4.506k Year 4 - 10% discounted 1.366k 4.098k - 4.781k Year 5 - 10% discounted 0.621k 3.726k - 4.968k Total 13.907k 22.740k 8.675k 22.021k NPV -1.093k 4.740k -1.325 4.021k
  • Summary
    • Reflect outcome 1 – PHYSICAL RESOURCES
    • Discuss
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 2.Plan, Monitor and Control Utilization Factors and Affect Upon Efficiency Criteria
  • 2.1. Introduction
    • The operating department budget should identify all costs and revenues expected to be incurred and produced. Within the after-sales departments of a retail motor dealer, labour sales play a dominant role within the body, paint and service department.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 2.1. Introduction
    • Hence labour utilisation is a very important and extensively measured performance of any workshop. And usually the bigger they are the more complex the measurements get.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 2.1. Utilization Factors:
    • In planning the utilization of the physical resources modern workshops make use of computer software programmes to calculate the inter-related efficiency and revenue rates.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 2.1. Utilization Factors:
    • Within the motor Industry throughput is measured on a continual basis with measured analysis occurring on a monthly cycle. It is important to recognise that within the make-up of the budget certain trend and seasonal fluctuations may or may not be accounted for.
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 2.1. Utilization Factors:
    • It is imperative that the department manager make themselves aware of any particular accruals or pre-payments of expenses and any aggregation of revenues set out by the accountant in the interest of the company policy and master budget.
    • The alternative to this is shear frustration!
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • 2.1. Utilization Factors:
    • The following are the main measures of utilization that impact upon the measure of efficiency and profitability of a department:
    • Human resources
    • Workshop loading
    • Available labour hours
    • Sold hours
    • Attended hours
    • Bought hours (Including bonuses and overtime)
    • Absences (Lost hours)
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Labour Efficiencies
    • It is important to not only monitor labour efficiencies, but also to include them in planning or costing when carrying out investment appraisals for physical resources
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources Labour efficiencies spreadsheet
  • 2.1. Utilization Factors:
    • Physical Resources
    • ►    Equipment depreciation
    • ►    Company vehicle utilisation costs (Insurance, Tax, Road fund licence, Fuels, etc…)
    • ►    Company vehicle depreciation costs.
    • ►    Recovery vehicle costs (Standing costs).
    • ►    Recovery vehicle downtime (Idle time).
    • ►    Driver’s hours regulation. (Routes and associated costs).
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Group Assignment Task
    • Prepare tasks 2a and 2b as instructed on your assignment sheet
    • Time allowed: 2 hours
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources A final draft of all tasks should be handed in by the date specified in your schedule
  • References
    • IMI Management books (current)
    • Armstrong: Human Resource Management 2001
    • Biddle: Evander: Human aspects of Management 1990
    • Nigel Slack: Operations Management 2001
    • David Farnham: Employee relations In Context
    • Peter Atrill: Financial Management for Non-specialists
    • Peter Atrill & Eddie McLaney: Accounting and Finance for non-specialists
    • J. R. Dyson: Accounting for Non-Accounting Students
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Sources of Capital
    • There are a considerable number of available sources of finance available to limited liability companies, although they vary depending upon the type of entity.
    • Central and local government, for example, are heavily dependent upon current tax receipts for financing capital investment projects, while charities rely on loans and grants.
  • Sources of Capital
    • The sources of finance available to companies depend upon the time period involved:
    • The short-term
    • The medium-term
    • The long-term
  • Short-term Finance
    • Trade credit is a form of financing common in all companies (and all other entities). An entity purchases goods and services from suppliers and agrees to pay for them some days or weeks after they have been delivered.
  • Short-term Finance
    • Bank overdrafts are a form of loan where the bank's customer is allowed to draw out more from the bank than has been deposited.
    • You normally pay an arrangement fee when an overdraft is set up. A 'limit' up to which you can borrow will be granted by the bank, and reviewed annually, when it can be increased, decreased or renewed at the same level. A renewal fee is payable for this service.
    Short-term Finance 28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Short-term Finance - Overdraft
    • An entity's overdraft may have to be secured by a floating charge. This means that the bank has a general claim on any of the entity's assets if the entity cannot repay the over- draft. There is usually an upper limit, the amount overdrawn can usually be called in at any time, and the interest charge may be high. The main advantages of an overdraft are that it is flexible and that interest is normally only charged on the outstanding balance on a daily basis.
  • Bills of Exchange
    • A bill of exchange is simply an invoice that has been endorsed (i.e. accepted) by a merchant bank ; the legal holder to obtain immediate finance can then sell it.
    • The interest charged depends upon the creditworthiness of the parties involved ; clearly, if an entity has a poor reputation, it will expect to pay more interest.
  • Commercial Paper
    • Commercial paper is a form of short-term borrowing used by large listed companies.
    • It is a bearer document , i.e. a person to whom the document is payable without naming that person.
    • The minimum amount permitted is £100,000 . This form of borrowing therefore is not appropriate for very many entities.
  • Sources of Medium-term Finance
    • Banks may be prepared to loan a fixed amount to a customer over the medium- to long-term period.
    • The loan may be secured on the company's assets and the interest charge may be variable .
    • Regular repayments of both the capital and the interest will be expected.
    • Bank loans are a common form of financing but the restrictions often placed on the borrower may be particularly demanding .
  • Bank Working Capital Finance
    • Finance arranged through bank-owned companies
    • Finance houses, which are specialist companies owned in the main by the major banks, offer alternative ways of obtaining fixed assets:
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Bank Working Capital Finance
    • Hire purchase
    • An HP agreement from a finance house enables a business to acquire an asset on the payment of a deposit and to pay back the cost plus interest over a set period, at the end of which ownership of the asset passes to the borrower
    • Hire purchase is often used to finance vehicles and machinery
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Bank Working Capital Finance
    • Leasing
    • With a leasing agreement, the business has use of assets such as cars and computers bought by the finance house. The business pays a regular 'rental' payment, normally over a lease period of two to seven years
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Leasing
    • Ownership of the asset does not normally pass to the business because the asset (the car, the computer) will have become out-of-date and will need renewing at the end of the lease period.
    • Clearly a lease is not a loan, but it can substantially reduce the financial requirements of a business when it needs to acquire assets such as computer equipment and fleets of company cars.
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Bank Working Capital Finance
    • Factoring - working capital finance
    • Many banks also provide factoring services through specialist factoring companies
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Factoring - Working Capital Finance
    • A business may have valuable financial resources tied up because its customers owe it money and have not yet paid. A factoring company will effectively 'buy' these debts by providing a number of services:
    • - It will lend up to 80% of outstanding customer debts
    • - It will deal with all the paperwork of collecting customer debts
    • - Insure against non-payment of debts
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Factoring - Working Capital Finance
    • Factoring releases money due to the business and allows the business to use it in its general operations and expansion plans. It is therefore a valuable source of short-term finance.
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Bank Fixed Asset Finance
    • Business loan
    • This is a fixed medium-term loan, typically for between 3 and 10 years, to cover the purchase of capital items such as machinery or equipment. Interest is normally 2% to 3% over base rate, and repayments are by instalments
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Bank Fixed Asset Finance
    • Commercial mortgage
    • If you are buying premises for your business you can arrange to borrow long-term by means of a commercial mortgage, typically up to 80% of the value of the property, repayable over a period of up to 25 years
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Bank Fixed Asset Finance
    • Your premises will be taken as security for the loan: if the business fails, the premises will be sold to repay the bank.
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Bank Fixed Asset Finance
    • Finance for companies: venture capital There are many specialist banks - 'merchant banks' - and investment companies which offer advice and financial assistance to limited companies looking for capital. This financial assistance takes the form of loans and venture capital, which provides finance for fixed assets and for working capital.
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Bank Fixed Asset Finance
    • Venture capital companies will view these companies as investment opportunities and will put in money in the form of loans or purchase of shares, or both. In return, they may expect an element of control over the company and will possibly insist on having a director on the board of the company.
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Bank Fixed Asset Finance
    • A venture capital company considering investing will look for a business with good sales and profit record - or potential.
    28/06/11 BTEC Higher Nationals in Motor Vehicle Management & Technolgy
  • Sources of Medium-term Finance
    • Credit sales are a form of borrowing in which the purchaser agrees to pay for goods (and services) provided on an instalment basis over an agreed period of time.
    • Once the agreement has been signed, the legal ownership of the goods is passed to the purchaser and the seller cannot reclaim them.
  • Leasing
    • Leasing is a form of renting . A fixed asset (such as a car or a printing press) remains legally in the ownership of the lessor. In the case of some leases, the asset may never actually be returned; in effect, the lessee becomes de facto the owner.
    • Leasing can be expensive, although if the lessor passes on what can sometimes be some very generous tax allowances, it can be a reasonably economic method of financing projects.
  • Long-term Finance
    • Long-term finance can generally be obtained from the following sources.
    • Debentures are formal long-term loans made to a company; they may be for a certain period or open-ended. Debentures are usually secured on all or some of an entity's assets. Interest is payable, but because it is allowable against corporation tax, debentures can be an economic method of financing specific projects.
  • Long-term Finance
    • Loan capital, for example is a form of borrowing in which investors are paid a regular amount of interest and their capital is eventually repaid.
    • The investors are creditors of the entity but they have no voting rights.
  • Long-term Finance
    • Unsecured loan stock is similar to debenture stock except that there is no security for the loan.
    • The interest rate tends to be higher than that on debenture stock because of the greater risk.
    • Convertible unsecured loan stock gives stockholders the right to convert their stock into ordinary shares at specified dates.
  • Long-term Finance
    • Eurobond loan capital can be obtained by borrowing overseas in the 'Euro' market. The loans are usually unsecured and they are redeemed at their face value on a certain date.
    • Interest is normally paid annually; the rate depends partly on the size of the loan and partly on the particular issuer.
  • Share Capital
    • Although the law recognizes that limited liability companies are separate entity’s with a life of their own the law likewise recognises the corporate responsibility and governance needed by the owners.
    • Only one person is now required to form a private company (two for a public company), and that person (or persons, if there is more than one), agrees to make a capital contribution by buying a number of shares.
  • Share Capital
    • The capital of a company is known as its share capital. The share capital will be made up of a number of shares of a certain denomination, such as 20p, 50p, and £1.
  • Share Capital
    • A member may hold only one share, or many hundreds of thousands, depending upon the total share capital of the company, the denomination of the shares, and the amount that he wishes to contribute.
    • The maximum amount of capital that the company envisages ever raising has to be stated.
    • This is known as its authorized share capital , although this does not necessarily mean that it will issue shares up to that amount.
  • Share Capital
    • There are two main types of shares:
    • Ordinary shares
    • Preference shares.
  • Rights Issues
    • Expansion of the company could be financed by increasing the number of ordinary shares available , either on the open market or to existing shareholders in the form of a rights issue.
    • An increase in an entity's ordinary share capital dilutes the holding of existing shareholders and all shareholders will expect to receive increasing amounts of dividend.
  • Share Capital
    • Ordinary shares do not usually entitle the shareholder to any specific level of dividend and the rights of other types of shareholders always take precedence over the rights of the ordinary shareholders, e.g. if the company goes into liquidation.
  • Preference Shares
    • Alternatively, new or additional preference shares could be offered; preference shareholders would have an automatic right to a certain percentage level of dividend, and so the issue of preference shares limits the amount of dividend available to ordinary shareholders.
  • Share Capital
    • Preference shareholders are normally entitled to a fixed level of dividend, and they usually have priority over the ordinary shareholders if the company is liquidated. Sometimes the preference shares are classed as cumulative; this means that if the company cannot pay its preference dividend in one year, the amount due accrues until such time as the company has the profits to pay all of the accumulated dividends.
  • Share Capital
    • The amount of share capital that it has actually issued is known as the issued share capital .
    • Sometimes when shares are issued, prospective shareholders are only required to contribute to them in instalments.
    • Once all of the issued share capital has been received in cash, it is described as being fully paid.
  • Debentures Loans
    • Companies often borrow money in the form of debentures.
    • Companies issue stocks called debentures, which are essentially long-term (over 15 years) bonds .
    • Debentures have advantages both to the companies, which issue them, and to the investors who buy them.
  • Debentures Loans
    • The investor has the advantage of a high level of security , since most debentures are secured by a charge on the assets of the company , however they may not be secured at all .
    • In addition, debenture holders can appoint a receiver if the firm is in financial trouble and they rank above all other loan creditors and shareholders when a failed company's assets are being redistributed.
  • Debentures Loans
    • Debentures as like shares are freely traded on the stock market. As such the nearer the trade date to the notes redemption date the greater the price as this relates to the developing value in relation to its face value, and may exceed this if trading is good on the company stock.
  • Debentures Loans
    • Debenture holders have no voting rights, as such from a company perspective this can be an advantage. Similarly a company can claim taxation relief against debenture issues in interest expenditure as these constitute long term loans.
  • Debentures Loans
    • Companies are obliged in law to pay interest on, and repay the capital of, debentures, regardless of whether the firm is making a profit or a loss!
  • Debentures Loans
    • A debenture loan may be secured on specific assets of the company, on its assets generally, or it might not be secured at all.
    • If it is secured and the company cannot repay it on its due repayment date, the debenture holders may sell the secured assets and use the amount to settle the amount owing to them.
  • Debentures Loans
    • Debentures, like shares, may be bought and sold freely on the Stock Exchange .
    • The nearer the redemption date for the repayment for the debentures, the closer the market price will be to their nominal (i.e. their face, or stated paper) value, but sometimes if they are to be redeemed at a premium (i.e. in excess of their nominal value), the market price may exceed the nominal value.
  • Debentures Loans
    • holders are not shareholders of the company, and they have no voting rights.
    • From the company's point of view, one further advantage of raising capital in the form of debenture loans is that for taxation purposes the interest can be charged as a business expense against the profit for the year (unlike dividends paid to shareholders).
  • Information, Rights and Company Accounts
    • Disclosure of It is necessary for both public and private companies to supply a minimum information amount of information to their members.
    • Ordinary Shareholders have no common right to the access of company assets property or information.
    • This restraint is imposed in order to protect the employed management from pressure of liaison rather than manager .
  • Information, Rights and Company Accounts
    • Instead, shareholders in both private and public companies have to be supplied with an annual report containing at least the minimum amount of information required by the Companies Act 1985.
    • The company also has to file (as it is called) a copy of the report (or abbreviated version) with the Registrar of Companies. This means that, on payment of a small fee, the report is open for inspection by any member of the public who wants to consult it.
  • Information, Rights and Company Accounts
    • Company accounts are very similar to those of sole traders .
    • They do, however, tend to be more detailed, and some modifications have to be made in order to comply with various legal requirements .
    • It must be clearly understood that any limited liability company is regarded as being a separate entity, i.e. separate from those shareholders who own it collectively, and separate from anyone who works for it.
  • Responsibilities
    • Directors are the most senior level of management. They are responsible for the day-to-day running of the company, and they answer to the shareholders .
    • Directors are officers of the company, and any remuneration paid to them as directors is charged as an expense of the business .
    • Directors may also be shareholders, this detail must be disclosed and should not be confused with salary all benefits subject to tax.
  • Office
    • The distinction between employees and shareholder-employees is an important one.
    • This is especially the case in very small companies where both employees and shareholders may be one and the same.
    • Thus shareholder employees exhibit no common traits with shareholders or partnerships.
    • The main difference is that the shareholder employee has a vested interest in the performance of the organisation
  • Capital Gearing
    • The investment ratio: capital-gearing ratio will be discussed in detail within the Finance delivery Unit 4.
    • Linked to the Return On Capital Employed it can present problems of interpretation.
    • As outlined companies are financed out of a mixture of share capital, retained profits and loans.
    • Loans may be long-term (such as debentures), or short-term (such as credit given by trade creditors).
  • Capital Gearing
    • If a company, therefore, finances itself from a high level of loans , there is obviously a higher risk in investing in it. This arises for two main reasons:
    • 1. The higher the loans , the more interest that the company will have to pay, and that may affect the company's ability to pay an ordinary dividend .
    • 2. If the company cannot find the cash to repay its loans, the ordinary share holders may not get any money back if the company goes into liquidation.
  • Capital Gearing
    • As far as item 1 is concerned, there will be no particular problem arising if profits are increasing , because the interest on its loans will become a smaller and smaller proportion of the total profit.
    • But it could become a problem if profits are falling and the interest has to be paid out of a continuing decline in profit. It might then be difficult to payout any ordinary dividend.
  • Capital Gearing
    • There are many different ways of calculating capital gearing. As indicated above, the entity will have been financed by a combination of shareholders' funds and loans.
    • The relationship between them can be expressed in two most common methods as follows:
    • 1. Loans / Shareholders' funds + Loans
    • 2. Loans / Shareholders' funds
  • Capital Gearing
    • The first method, since it expresses a percentage, it appears clearer, i.e. ‘ x % of the company has been financed by loans’.
    • The second method shows the loans represent a certain proportion of the shareholders' funds (including preference shares).
  • Shareholders' Funds and Loans
    • These include the following items:
    • - Ordinary share capital
    • - Preference share capital (Note 1)
    • - Share premium account
    • - Capital reserves
    • - Revenue reserves
    • - Other reserves
    • - Profit and loss account
  • Shareholders' Funds and Loans
    • Loans may (but will not necessarily) include the following items:
    • - Preference share capital (Note 1)
    • - Debentures
    • - Loans
    • - Overdrafts
    • - Provisions
    • - Accruals
    • - Current liabilities
    • - Other amounts due for payment
  • Notes
    • Notes:
    • (1) Some accountants exclude preference share capital from shareholders' funds because they regard it as a type of loan.
    • (2) In a complex group structure, you might also come across other items that could be classed as loans.
  • Capital Gearing
    • The following is a straightforward definition of capital gearing:
    • Preference shares + Long-term loans
    • Total Shareholders' funds + Long-term loans
    • x 100 = x %
  • Activity
    • Using the following data please calculate the capital gearing ratio for the 3 businesses
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Activity
    • Answers
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Capital Gearing
    • A company that has financed itself out of a high proportion of loans (e.g. in the form of a combination of preference shares and long-term loans) is known as a highly geared company.
    • Conversely, a company with a low level of loans - is regarded as being low-geared .
  • Capital Gearing
    • Note that high and low in this context are relative terms. As indicated above, a highly geared company is potentially a higher risk investment, as it has to earn sufficient profit to cover the interest payments and the preference dividend before it can payout any ordinary dividend.
  • Capital Gearing
    • This should not be a problem when profits are rising, but if they are falling, then they may not be sufficient to cover even the preference dividend.
    • The gearing ratios make up important elements of the overall capital and investment ratio analysis.
  • Capital Structure and Financial Risk
    • In addition to an assessment of the short-term liquidity position of a company, it is also important to examine the overall means by which a company finances its operations .
    • It is usual for a company to be financed partly by loans from banks and other lenders and partly by the funds of its ordinary shareholders.
  • Capital Structure and Financial Risk
    • These two sources of finance are normally referred to respectively as debt and equity , and the relationship between the two gives a measure of the gearing of the company.
    • Gearing has important implications for the long-term stability of a company because of its effect on financial risk.
  • Capital Structure and Financial Risk
    • The providers of loan capital (debt) require a fixed amount of interest to be paid to them each year, irrespective of the level of profits earned.
    • The providers of equity capital do not enjoy a fixed reward each year, but are entitled to a percentage of the residual profits after all other payments including interest charges have been met.
  • Example
    • For example, if an all-equity firm earns operating profits after tax of £200,000, then the amount accruing to ordinary shareholders, either as dividends or retained profits, will be £200,000.
    If in the next year the profits fall by 25 per cent to £150,000, then the amount accruing to ordinary shareholders will also fall by 25 per cent.
  • Example continued
    • However, if the company were geared, i.e. if it were financed partly by loans requiring an after-tax fixed-interest payment of, say, £75,000 per year, then the profits available to ordinary shareholders in the first year would be £125,000 (£200,000 minus interest of £75,000), but in the second year these would fall to £75,000 (£150,000 minus interest of £75,000), a decline of 40 per cent.
  • Conversely
    • Conversely, if profits had risen by 25 per cent to £250,000, the earning available to the ordinary shareholders in the geared company would have increased to £175,000 (£250,000 minus £75,000), an increase of 40 per cent.
  • Return Debt Vs. Equity
    • Nevertheless, gearing does have its advantages . It might be reasonable to expect that the benefits of a fixed amount of interest every year and priority over shareholders on liquidation should make the cost of debt capital cheaper than that of equity.
    • In other words, the average return expected by lenders should be lower than the average return expected by shareholders .
  • Tax Allow
    • Furthermore, the interest payable on loan capital is an allowable expense when determining taxable profit, whereas dividends are a distribution out of the after-tax profits.
    • Thus, for a company that pays corporation tax at the rate of, say, 35% on its taxable profits, the after-tax cost of interest payments will be reduced in the same proportion, because every £100 paid in interest will reduce taxable profit by £100 and therefore tax payable by £35.
  • Return Debt Vs. Equity
    • To the extent that debt is a less expensive source of finance than equity, then initially the use of gearing might be beneficial, providing that the advantages of lower-cost debt more than compensate for the disadvantages caused by increased financial risk.
    • However, as gearing increases, the financial-risk effect will begin to outweigh the benefits of low- cost debt.
  • Balance?
    • This implies the existence of some optimal level of gearing that a company should try to achieve.
    • Empirical evidence would suggest that companies no longer assume that one specific level of gearing is appropriate all the time and in all the circumstances.
  • Return Debt Vs. Equity
    • For example, during the downturn of an economic cycle companies will attempt to reduce their gearing and then reverse it on the upturn.
    • This will minimize the risks concerning non-payment of interest in poor trading conditions on the one hand, and on the other hand enable the company to gain the benefits of the gearing on the upturn in profits.
  • Return Debt Vs. Equity
    • The ever widening portfolio of types of long- and short-term capital available to a company may make life more complex for financial managers, but at the same time it will hopefully reduce the financial risks by the better matching of fund type with corporate need.
  • Legal Duties for Companies (UK)
    • The forming of limited companies requires complex procedures and structure when compared to sole trader and partnerships
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources
  • Documentation
  • Documentation
    • Companies House, a government-owned agency, regulates Companies.
    • All companies have to register with Companies House and are issued with the company equivalent of a birth certificate - the Certificate of Incorporation .
  • Documentation
    • Small businesses such as sole traders and partnerships require relatively little in the way of paperwork.
    • Setting up a limited company, on the other hand, requires substantial documentation.
  • Documentation
    • In addition, a company will also need two further documents:
    • - The Memorandum of Association - which states what the company can do
    • - The Articles of Association - the internal 'rulebook' of the company
    • Refer to Automotive Independent registration
  • Limited Company
    • A company registered in accordance with the provisions of the Companies Acts is a separate legal entity distinct from its owners or shareholders, and its directors or managers. It can enter into contracts and sue or be sued in its own right. It is taxed separately through Corporation Tax.
  • Limited Company
    • There is a divorce between management and ownership, with a board of directors elected by the shareholders to control the day-to-day running of the business.
    • There need be only two shareholders and one director , and shareholders can also be directors.
  • Advantages
    • The advantage of this form of business is that the liability of the shareholders is limited by the amount of capital they put into the business. What is more, a company has unlimited life and can be sold on to other shareholders.
    • There is no limit to the number of shareholders. Therefore a limited company can attract additional risk capital from investors who may not wish to be involved in the day-to-day running of the business .
  • Advantages
    • Also, because of the regulation they face, bankers prefer to lend to companies rather than sole traders, although they may still require personal guarantees. Clearly this is the best form for a growth business that will require capital and will face risks as it grows.
  • Disadvantages
    • Nevertheless there are some disadvantages to this form of business. Under the Companies Acts, a company must keep certain books of account and appoint an auditor. It must file an annual return with Companies House, which includes accounts and details of directors and shareholders.
    • This takes time and money and means that competitors might have access to information that they would not otherwise.
  • Incorporation
    • The easiest way to set up a company is to buy one ‘off the shelf' from a Company Registration Agent at a cost of approximately £24.99: http://www.ukplc.net .
    • This avoids the entire tedious form filling that is otherwise required. It also saves time. Agents will also show you how to go about changing the company's name if you want to.
  • Investor Information
    • Public Limited Companies...are able to offer shares to and raise funds from the general public, although this is not compulsory.
    • Some are run privately but prefer having the status of a plc.
    • Plc's must have a minimum of:
    • 2 directors,
    • a qualified company secretary,
    • and a minimum share capital of £50,000.
    • Most public limited companies in the United Kingdom have their shares listed on the London Stock Exchange, and hence they are often referred to as listed companies.
    • E.g. http://www.douglas-cs.co.uk/plc .
  • Investor Information
    • Any company that does not make its shares available to the public is regarded as being a private company .
    • Like public companies, private companies must also have an authorized share capital, although no minimum amount is prescribed. Otherwise, they are very similar to public companies in respect of their share capital requirements.
  • Summary of Advantages and Disadvantages   Sole trader Partnership Limited company Advantages Easy to form   Minimum of regulation Easy to form   Minimum of regulation Limited liability   Easier to borrow money   Can raise risk capital through additional shareholders   Can be sold-on Pays Corporation Tax Disadvantages Unlimited Personal liability   More difficult to borrow money   Pay personal tax Unlimited personal liability for partnership   More difficult to borrow money   'Cease trading' whenever partners change   Pay personal tax Must comply with Companies Acts   Greater regulation   Greater disclosure of information
  • Formation of a Limited Company
    • The Companies Act generally allows one or more persons to form a company for any lawful purpose by subscribing to its memorandum of association.
    • A public company or an unlimited company must have at least two subscribers.
  • Formation of a Limited Company
    • There are four main types of company:
    • Private company limited by shares - members' liability is limited to the amount unpaid on shares they hold.
    • Private company limited by guarantee - members' liability is limited to the amount they have agreed to contribute to the company's assets if it is wound up.
    • Private unlimited company - there is no limit to the members' liability.
  • Formation of a Limited Company
    • Public limited company (PLC) –.
    • The company's shares may be offered for sale to the general public and members' liability is limited to the amount unpaid on shares held by them.
  • Formation of a Limited Company
    • Ready-made companies are available from company formation agents, these companies are available to the public through various media and information sites and this is relatively simple to put into operation.
  • Formation of a Limited Company
    • However incorporating a company yourself means you will need to send the following documents, together with a registration to the Registrar of Companies:
    • A memorandum of association.
    • Articles of association (except in some specific circumstances; ref; - Companies House).
    • Companies House forms
    • Form 10
    • Form 12
  • The Memorandum of Association
    • This document sets out:
    • · The company's name.
    • · Where the registered office of the company is situated (in England, Wales or Scotland).
    • · What it will do (its objects). The object of a company may simply be to carry on business as a general commercial company.
  • The Memorandum of Association
    • Other clauses to be included in the memorandum depend on the type of company being incorporated.
    • The form of memorandum for each type of company is set out in a set of tables called The Companies Regulations, 1985.
    • Each subscriber in front of a witness who must attest the signature must sign the company’s memorandum delivered to the Registrar.
  • Articles of Association
    • This document sets out the rules for the running of the company's internal affairs. Companies House provides model articles. A company may adopt the whole of the model reference as its articles or any part of it.
  • Form 10
    • This form gives details of the first director(s), secretary and the intended address of the registered office . As well as their names and addresses, the company's directors must give their date of birth, occupation and details of other directorships they have held within the last five years. Each officer appointed and each subscriber (or their agent) must sign and date the form.
  • The Registered Office
    • It is the address of a company to which Companies House letters and reminders will be sent. The registered office can be anywhere in England and Wales (or Scotland if your company is registered there). The registered office must always be an effective address for delivering documents to the company.
    • If a company changes its registered office address after incorporation, the new address must be notified to Companies House on Form 287.
  • Appointed Officers
    • Every company must have formally appointed company officers at all times.
    • A private company must have at least:
    • One director - but the company's articles of association may require more than one
    • One secretary - formal qualifications are not required. A company's sole director cannot also be the company secretary.
  • Appointed Officers
    • A public company must have at least:
    • Two directors;
    • One secretary - formally qualified.
    • All company officers have wide responsibilities in law.
  • Appointed Officers
    • After incorporation, you must tell Companies House about:
    • The appointment of a new officer - use Form 288a;
    • An officer's resignation from the company - use Form 288b;
    • Changes in an officer's name or address or any of the other details originally registered on Form 10 - use Form 288c.
  • Company Directorship
    • General exemptions:
    • Where you are an un-discharged bankrupt or disqualified by a court from holding a directorship , unless given leave to act in respect of a particular company or companies;
    • In the case of plc's or their subsidiaries, you are over 70 years of age or reach 70 years of age while in office, unless you are appointed or re-appointed by resolution of the company in general meeting of which special notice has been given.
  • Form 12
    • Form 12 is a statutory declaration of compliance with all the legal requirements relating to the incorporation of a company. It must be signed by a solicitor who is forming the company, or by one of the people named as a director or company secretary on Form 10.
  • Company Names
    • The registration of the company name is controlled by Companies House to avoid duplication, offence and misrepresentation.
    • In addition certain constraints are also in place to avoid infringement of patent or property. It is also important to check whether the chosen name is similar to any other names already on the register. If your chosen name is too similar to another name, an objection can be brought to the Secretary of State.
  • Group Assignment Tasks
    • Prepare tasks 3 and 4 as instructed on your assignment sheet
    • Time allowed: 4 hours
    • A final draft of all tasks should be handed in by the date specified in your schedule
    28/06/11 BTEC Higher National in Motor Vehicle Management & Technology. Unit 2.Managing Resources