Corporate Financial Strategy
Group Assignment
Deadline: 30/08/2021
Instructions
1. Students should work in groups, 5 – 6 members in a group.
2. Works submitted after the deadline will not be accepted.
3. Reports should be typed with font size 12 using Times New Roman with double – spacing
throughout. Justify the text. Submit only a soft – copy through the LMS.
4. Students who submit shoddy works including works with spelling mistakes, grammatical errors
etc will be penalized.
The Assignment
Derlex Ltd is a new UK-based fashion start-up company created by two enthusiastic, confident,
and ambitious undergraduate students, Alex Welch and Derek Kirby. Created in 2011, the
company operates under the UK-registered Brown Circle brand name, and produces a range of
high-quality sportswear products (polo shirts, bags, caps, etc.), which are sold over the Internet,
and through a few selected retail outlets. With its products and services aimed at the proactive
sports-orientated 20- to 50-year-old, the company’s aim is to:
■ produce and deliver a quality product and service
■ develop customer loyalty for the Brown Circle product portfolio
■ create and maintain a financially viable and sustainable business.
The company’s mission is to ‘… establish the Brown Circle brand as an inspirational symbol of
style and class’.
The initial start-up costs of the company were fairly small and mainly administrative and
management orientated, for example company registration costs, brand name registration costs,
and product design costs.
The directors’ financial projections indicated low cash inflows for 2012 but high and increasing
cash inflows for 2013 and subsequent years. During early 2012, product manufacturing costs,
distribution and marketing costs, and other retail development costs, for example website design
fees, began to be incurred. Additional funding was now required over and above that initially
invested by the two directors, Alex Welch and Derek Kirby. Some start-up grants were available
from a range of both UK Government sponsored business agencies, and university – related
agencies, but such funding was limited. The additional funding was required to finance:
■ immediate short-term operational costs
■ further product and service delivery plans.
The options available, in addition to the start-up business grants, were:
■ short- to medium-term debt, including loans and overdraft facilities
■ additional equity capital.
Required:
Draft a report for Alex Welch and Derek Kirby, which outlines the current position of the
business and the appropriate financial strategies that it may adopt. Your report should
explain the differences between a start-up company, growth company, and mature company,
and the financial strategies that each may follow. The advantages and disadvantages of
alternative strategies should be explained, with recommendations of the financial strategies
that are most likely to increase shareholder value and how they will achieve this.