1. In this case, taking over is more advantageous. In the first place, the business has grown and requires specialized skills to manage. Taking the money will facilitate good management of the organisation and the current owner will benefit from the dividends from shares that are allocated to him. The current owner will also enjoy sharing of losses. In case, the new business makes losses, the losses are shared equally hence the current owner will not bear all the losses alone. The other advantage is that the business will now be able to access more capital and invest in many projects that will increase the revenues of the business hence benefiting the current owner.
Pros of take over.
Comet skateboards will benefit from competencies of the company that is requesting for acquisition. When competencies from both companies are combined, efficiency in the new organisation improves. Improved efficiency leads to competitive advantage in the market and this can be a reason for success of the organisation.
Acquisition can lead to increased market since the markets of the two organizations are combined together and the new company serves the larger market. This leads to increased revenues hence the profits of the new organisation.
Cons of acquisition.
One of the disadvantages of acquisition is that the shareholders of the initial companies lose the control that they had over their business. With the increased shareholders, it means that the control that each shareholder has over the company reduces.
Problems in management also arise. There may be conflicts between the management of the two involved companies. These conflicts can go to an extent of affecting the activities of the new organisation. The culture of the two organisations can be so different such that it takes a lot of time for the new organisation to adapt to a new culture.
It can be so costly to implement an acquisition. The legal process of acquisition may lead to spending huge sums of money, which means that operating capital of the formed organisation is greatly reduced. In this case, the new organisation may face difficulties in normal operations.
Important financial concepts can be applied in personal financial planning. The first concept is accessing the financial needs. One should be able to assess the funds required to accomplish a certain plan and the best source of the funds. The second concept is ability to manage credit. This means that individuals should learn to allocate the funds they earn to expediture and at the same time, pay the debts that they have borrowed. The concept of insurance is also important in personal financial planning. Insurance means that people should be able to transfer risks that they have to third parties if they cannot manage such risks.
Failure to plan can affect an individual both in short term and in the long run. If one does not have a financial plan, he/he is likely to have debts that cannot be managed. The results are that such a person losses assets that were provided for as security. This can lead to a stressful life. Failure to plan can lead to huge expediture on borrowed funds. Interest paid for borrowed funds is a cost to individuals that can be avoided with a proper plan. Failure have a financial plan can make one live a poor life after retirement. This is after one has misused money at early ages due to lack of personal financial plan.
Reference.
Kurtz, D. L. (2012). Contemporary business. Hoboken, N.J: John Wiley.
