Essays on Managing Financial Resources and Decisions - Life Mimetics Company Case Study

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The paper "Managing Financial Resources and Decisions - Life Mimetics Company " is a perfect example of a finance and accounting case study. Life Mimetics company has three sources of income including testing, research and presenting to the market a wide range of medical devices. The sales of the devices as well as getting research contracts for government organizations such as businesses and universities. The company gets further funding from other stakeholders for instance investors and capital funds in the healthcare sector. Finance and Opportunity Costs From the Life Mimetic balance sheet as of 31st December, the financial statement reveals that there are payables that are constituting a large proportion of the financial costs.

In essence, opportunity costs should be given consideration to minimize the cost of running a business. In financial terms, opportunity costs are the best choices that should be chosen in order to utilize the limited resources effectively. (Askew, 2011) In this case, If Life Mimetics issues a 5m ordinary share to a new investor, at an offer price of 1.50 pounds, it cost of investment will be put at risk.

However, with the recent growth in sales, the financial implication will be beneficial to the company as it will bring in a profit in a span of 5 years. Similar, the benefit that is forgone is less than the actual sales, and the rate of gross profit is expected to hit 45% with product sales estimated to increase by 80% per annum. The tax implication is that over the next five years, and the income tax will increase given the fact that a 5m pound amount will be retrieved from sales in the same period.

Contrary to this, the company's nature of the healthcare, medical and government sectors, Life Mimetics is bound to receive tax incentives or subsidies since the government would like to keep healthcare accessible. (Askew, 2011) On the other hand, a long-term ten years financial bond of 5m that is paying 8% per annum with a value of 1 pound at an offer price of 0.80 is financially beneficial to Life Mimetics. Given to an existing investor, there is an allowance for him to convert the bond to ordinary shares.

References

Askew, D. (2011). Financial statements in Business: Taxation Law. Acton: Australian

National University.

Justin A. (2009). Principles of Financial Statements ( Rock view Review). Task group,

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