Richard Limited and Orica Finance Solutions Scenario: You (Edward) are a financial consultant working with Orica Finance and Solutions providing financial services to a portfolio of clients you work within achieving financial management solutions. Richard Limited is an SME business involved in the production of solar panels with little financial expertise to manage their capital/ funding costs. Richard is an ongoing client of Orica Finance and solutions. Normally Orica reviews his financial plan every year but this time he approached early as he needs to take major financial decisions. You need to assess client needs and analyze their financial data and provide advice as per your analysis from extracts of financial accounts. Richard Limited, one of your clients has approached you to assist them in the following matters. You have received the following email and a copy of the financial reporting policy from Richard CEO of Richard limited.

Email: Hi Edwards discussed over the phone I am sending you the following information to estimate the risk profile of my company as I need to make few major financial decisions based on current financial health of my organization. My risk preference is medium level and wants to assess the cost of capital in terms of rate of return. Richard limited is planning to shift their production line to China or they have options to start production line in Wodonga (regional Victoria) rather than continuing in Port Melbourne due to higher cost of production. Ideally, I want to shift production within 6 months before the expiry of the existing lease which is expiring on 31st October this financial year. As per my finding Company can reduce the cost of production operation by:• 15% if shifting to China• 5% if shifting to regional Victoria I am attaching the current year’s financial statements of my organization for your reference.

Regards

Richard Squires

You have extracted the following information from Richard Limited’s accounts regarding capital structure:

$ 4,000,000 Ordinary shares of $1 each with a Market value at $ 1.5 per share. A dividend at the rate of 5% will be paid out on these shares. These dividends are expected to grow at a rate of 4.5%. The company Tax rate is 30%.

$ 4,000,000 10% Preference shares of $1 each with a Market value at $ 0.9 per share

$1,000,000 Retained Earnings

$ 7,000,000 10% Mortgage.

Task 2: Role-play

You (Edward) need to set up a time, date, and venue for the meeting with Richard(your assessor will play the role of Richard, role play will be held in the simulated work environment of RMIT) to:

a)Discuss at least two (2) financial options and processes with Richard to develop suitable plans (e.g. for short- and long-term financial requirements, meet regulations, business structure etc.) for providing information and achieving the company’s goals within 6 months.

b)Discuss and justify the best option after the review of the financial plan and communicate how the option is most viable to the company’s current financial state. Suggest how this will be implemented, monitored, and reviewed on a regular basis to achieve administrative efficiency and consolidation.

c)Discuss how risks and contingencies will be managed along the way. These contingencies can be changes in the client’s needs or any change in opportunity cost, funding cost, or business forecast.

d)Summarise the key outcomes of the meeting including any agreed criteria against which the plans will be reviewed in future and submitted this via Canvas.