Essays on Business Opportunity of the TNA Company Case Study

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The paper 'Business Opportunity of the TNA Company" is a good example of a management case study. This report analyzes the business opportunity of the TNA Company, which wants to purchase and acquire ownership of the Vietnamese company. The company deals with the manufacturing of equipment for food processing and packaging. The company is lagging behind its competitors due to old and outdated equipment and high-cost structure. TNA, therefore, needs $A10 million for this business opportunity. Some of the sources of funds needed by TNA to raise the stated amount is discussed.

These sources include bank borrowing, government sources, and capital markets. A capital budget evaluation is carried to determine whether the opportunity is financially viable and profitable to TNA or not. The Net Present Value (NPV) technique is used for this evaluation. From an evaluation, the calculated NPV value is negative thus the company would lose money at the project's timeframe. It should, therefore, avoid investing $A10 million in the project since it is not financially viable or profitable. However, if it chooses to invest $A7 million it will gain money, and the project would be profitable. Introduction TNA is an Australian company that was established in 1982 dealing with various products solutions.

For instance processing, coating, distribution, control and integration, promotion, etc. During the early period of growth, TNA became the first company to have its stand at Interpack, Dusseldorf. Over the years, it has expanded globally having branches in all continents. It plays a big role in the food processing industry. Recently it bought and acquire ownership of Florida Company thus increasing the high volume of food processing solutions for a big variety of snacks foods including potato chips and French fries along with new patented technology.

It is dedicated to adding value to its customers business by discovering more resourceful ways to package and process food products. Financial needs of any company, organization or business enterprise are of different types; short term, long term, fluctuating and fixed. Companies, therefore, resort to different sources for raising the funds they are in need. Long-term borrowing is majorly considered a necessity for many reasons. Also, equity finance plays a great role in the scheme for raising capitals in the corporate sector.

Factors that affect the choice of sourcing funds by companies include cost, purpose and period, risk profile, financial strength and operations' stability and form of business and legal status. Business companies should plan according to the period for which the funds are needed. A short term, for instance, is met through borrowing funds at low-interest rate via commercial paper, trade credit, etc. For the case of long term financial need, sources like debentures and issue of shares are more relevant. Also, long term business growth plan should not be financed by a bank overdraft that will be obligatory to be paid in the short term.

It raises the recommendation of considering the purpose of funds to match the source with the fund's usage. The business Companies plans should also carry out the risks involved in every source of finance they are opting to choose. For instance, there are fewer risks in equity since the share capital has to be repaid only when winding up, and dividends do not need to be paid if profits are unavailable.

Reference

Gollier, C. (2009). Expected net present value, expected net future value, and the Ramsey rule. Munich: CESifo.

Bierman, H., & Smidt, S. (1980). The capital budgeting decision: Economic analysis of investment projects. New York: Macmillan.

Choudhry, M. (2002). Capital market instruments: Analysis and valuation. London: Financial Times Prentice Hall.

Beenhakker, H. L. (2001). The global economy and international financing. Westport, CT: Quorum Books.

CFO Edge, 2011.Negotiating Fair Financial Covenants.

http://www.tnasolutions.com Background about TNA

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