20. Decisions about the gearing the company.

The greater the proportion of long-term debt, the more exposed the company is in times of economic difficulty. This is connected with making decisions about the gearing of the company.

When a company is said to be "high geared", the level of borrowing is high when compared to its ordinary share capital. A lowly-geared company has borrowing which are relatively low. High gearing has the effect of increasing a company's profitability when the company's trading is expanding; if it slow down, then the high interest charges associated with gearing will increase the rate of slowdown. There will also be a drop in profits if working capital is raised without a corresponding rise in production or margins.

We can distinguish between permanent and temporary working capital. The former keeps the business flowing throughout the year, while the latter is needed from time to time to take accoiunt of seasoned, cyclical or unexpected fluctuations in the business. The temporary working capital is usually serviced from an overdraft facility.

Inventories (raw materials, work in progress and finished goods) are part and parcel of working capital. If inventories are not well managed there will be an enormous amount of excess working capital. Working capital is required to finance the gap between payment due to suppliers and payment owed by customers. A balance must be achived between getting and giving good credit terms in order to attract customers and maintain positive relationships on the one hand, and minimizing cash outlay on the other hand.

Another thing is that adequate cash should be available for meeting the company's day-to day debts and there should always be a reserve on hand to meet contingencies. The expected cash flows that will result from potential investment projects should be measured carefully.

14. Insurance for a private company.

Every firm insures itself against loss or damage to its property. Blanked insurance means insurance which covers everything, a comprehensive police. The premium is a percentage of the total value of goods.

The underwriters employ adjusters, assessing the loss or damage. This sum usually less than the full insured value of the property.

Often companies & persons insures the goods or property against almost anything that could happen. But most insurance companies put in some exceptions, like war or Act of God.

First you take out a policy, then you put in a claim, & the insurance company, you hope, agrees to meet the claim.

In H&G company all goods delivered for them within the United Kingdom are covered by a blanket insurance policy. They are insured with a syndicate of Lloyds underwriters. Christopher Thorn went up to give an opinion of the desk’s damage, which were founded after its hijacking. Mr. Roberts, Brown & Johnson’s representative didn’t think that the filling cabinets were too badly damaged. He said that, they could be quite easily knock out and the desks could be repainted. But Christofer didn’t agree with him. After it Roberts recommended payment of 75 % of the insured value. In this moment he saw a piece of paper. He read on this paper the drivers can’t can’t give a lift to any person not being an employee of Anderson Transport Company. As a driver unformed the policy that he gave a lift to the man in the transport cafe Anderson’s should be held responsible for any damage to their customers’ goods in transit if the damage is caused by negligence on the part of the driver. In this case insurers needed be liable at all.