Essay Title: 

financial management

April 3, 2016 | Author: | Posted in finance, mathematics and economics

Financial Management

2007

Financing Sources of Construction Companies

1 . Introduction

1 .1 Financing in Construction Companies

At any stage of business growth , a firm always needs a sum of money to finance their operation and expansion . Businesses at any size like McDonald ‘s , Marks and Spencer , Unilever , and Debenhams , for instances must require a huge amount of money to finance their expansion into other parts of the world

Similarly , the situation also happens at construction companies in the UK that also require extra money to finance their operation and [banner_entry_middle]

possibly acquisition of supporting subsidiaries (Table 1

Table 1 Costs at Construction Companies

Costs Cost category Note

Raw materials Variable Cost of materials increases as the production increases

Energy Variable Offices and plants will utilize more energy to produce more outputs

Personnel (direct labor ) Variable Increased HYPERLINK “http /www .economicswebinstitute .org /glossary /prdctvt .htm productivity results in increasing number of personnel

Personnel (indirect labor ) Mixed The size of administrative personnel does not change so much when production increases except it raises significantly

Office /plant rent Fixed The plant rent is fixed for a given period

Policy costs (advertising , R D , retention ) Fixed or Mixed Discretionary costs (Piana , 2003 In addition , corporations in the construction industry cannot sustain their business growth without additional capital that may come from private equity firms , long-term debts , and internal sources like stakeholders and previous years ‘ operating profits . Therefore , paying attention to different kinds of costs in the construction industry is important since the industry is prone to cash shortage and to boost the profit margin for stakeholders

1 .2 . Stages of Growth

Concerning the financing in construction companies , this will elaborate several practices of financing those companies in the UK perform . However , since financing composes of several stages , this will only consider the financing at the growth stage by comparing financing practices in four companies they are Carillion plc , Marshalls plc , Kier Group plc , and George Wimpey UK Ltd

There are many stages at business life cycle they are startup /introduction , initial public offering (IPO , growth stages , etc each of them has particular financing strategy . In the growth stage , the characteristics of companies in this stage are they require money to finance their business expansion including merger and acquisition with subsidiaries that support main business

2 . Financing Practices at Construction Companies

2 .1 . Carillion plc

Carillion plc is the first construction company in the UK that combines the excellence of construction quality with value added services such as the provision of long-term service commitment to customers . The company gains reputation not only for their high quality design and project achievements but also for their attractive approach in maintain customers in the long-term including the improvement in the energy usage , finance and facilities management (Carillion , 2007

The situation results in the increasing number of projects , which in turn raises greater revenue for Carillion plc . Recent projects include well-known Tate Modern in London and new hospitals in Swindon and Oxford . Their reputation also drives the company… [banner_entry_footer]

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