Finances Sources for Selected Companies (Merak film S.r.l.) Founded (Essay Sample)

FINANCES SOURCES FOR SELECTED COMPANIES (MERAK FILM S.r.L) FOUNDED
SINCE 1980
By (Name)
Course
Tutor
University
City (state)
Date
Entrepreneurial Finance
Introduction
People say that the well-crafted work in the film business is conducted far from the glamour, the light, and the videos by the individuals or organizations who give funds to the films. Though this statement maybe an exaggeration, all it tries to imply is that film industry has not been open with its film financing process so that it can be accessed by potential financier CITATION Bau01 \l 1033 (Baumgarten, 2001).
The kind of operation an organization takes is determined by the capital structure it adopts , if an Organisation has a very thin structure are limited to growth while those with a well-established capital structure experience continual growth and are able to attain a high level of competitiveness CITATION Bla03 \l 1033 (Blair, 2003). All the funding's received in an organizations from its various sources should then be, managed appropriately so that the organizations develop an enabling environment for growth,
This report therefore is focused on how two companies acquire their funding's, these companies have been in existence since 1980 and they are in different countries, this report is aimed at comparing and contrasting the sources of funding's of the two companies. A clear description of these sources is drawn, the management of those funds and finally the report shows how the two companies utilize their sources of funds to enhance growth.
The Companies
Merak Film S.r.l
Merak Film is an Italian company that was founded in 1980. Its main services include video and audio post production for cinema, television industry and dubbing. It also does lip-sync, planning, voice casting, audio playback and translaton.it is located in cologne Monzese in Italy.
The other company addressed is called Proctor meats limited. It was founded in 1982 after the dissolution of Kenya Meats Company which was located in the country's capital Nairobi. The company's services are providing meat and other meat products CITATION Cow00 \l 1033 (Cowen, 2000).
This report discusses in depth the various sources of funds available to these two companies and compares and contrasts them. In light of those financial sources, the report highlights how the two companies uses those funds to create their growth.
Sources of funds for Merak Film S.r.L
Public sources
The financing of this company include both the public and private funds. The major public funding was a body concerned with films financial support in Italy CITATION DeV07 \l 1033 (DeVany, 2007). It supports film companies on behalf of the government. It usually happens in two various channels
1. The review process and the finances decisions are tackled by one film consultant of their own. The role of the consultant is to access the market viability, the artistic nature of the film.
2. Funding decisions are done on the basis of the film's expected market potential.
These two public funding systems, they still expect that the private sector can chip in and meet part of the budget. The private sector manages to meet at least 20-30% of the budget
Other sources of public funding's include TV fund and the Nordic film. This two sources provide the funds required for production of films and the distribution of the same in Italy. Public funding forms a strong financial base for the company as it covers 56% of the total amount required in meeting its production expectations. The funding that sped its growth (Parra and Kahn, 2001) was contributed by the public sources hence cause the company to become strong.
Advantages of using Merak Film S.r.L using public funding,
Public sources normally give money for free and any loans they lend go with a very low interest rate as compared to what one can outsource from the source from banks or any other credit offering institutions CITATION DeV07 \l 1033 (DeVany, 2007).
Disadvantages
There is a lot of bureaucracy that is associated with this kind of money. It is comes with it red tapes and at times it is not available for some types of business CITATION DeV07 \l 1033 (DeVany, 2007). Very few people are in a position to access these funds. The process to is tedious and requires a lot of documentation that discourages people to follow to the later.
These funds may periodically be affected by the budget issue. And depending on the report of the budget for a particular year, then the availability of funds is dependent on the results of that budget issue CITATION Fil07 \l 1033 (Facts and Figures 2006, 2007).
Any funds provided by the government must be paid. This is regardless of whether the business is doing well or it is collapsing CITATION Nis11 \l 1033 (Choudhary., 2011). The company has to pay back the borrowed money together with the interest accrued.
Private Sources
The company also has a private financing structure which helped in the production of their films. The different categories of these private sources include
* Producer
* Distributor
* Use of deferred payment
Producer
This money is invested by Merak Company incorporating other film production companies hence making it a form of equity investment. Private producers contributed 18% of the aggregate 6.8 million of Merak Film budgeted production cost. The average investment of the private producer covered equal shares for both production and distribution budgets.
Distributor
The money that the distributor company invested. This on average represented the greatest share of the capital contributed by the private sources. Out of 2.6 million or 39% required by Merak Film S.r.L, required, it was given by the distributor making it almost twice as much as what the distributor gave out. . The money was distributed in both production and acquisition of the materials required for production of films. Some distributors contribute deferments and when this is combined with the cash it raises their capital investment in the company.
Deferments
These are costs budgeted on both production and distribution of films that are to be paid on a delayed basis not out of the budgets but from the film's revenue. They are done by the production and post-production companies in addition to what producers and distributors gave out. These companies include
1 Suppliers
2 Directors
3 Writers
4 Cinematographers
The total amount covered by this deferments was 21% of the total private capital.
Advantages of using private sources as a source of funding.
* The risk is distributed and it is not solely carried the company CITATION Bod04 \l 1033 (Bodington, 2004).
* The investors will keep funding the business so long as they receive their returns,
Disadvantages
An element of control over the company is given up, this is because, and investors need to be pleased even if one is the majority interest retainer.
All profits are also shared with any other party that aids in funding the business CITATION Nis11 \l 1033 (Choudhary., 2011).
Recommendations for Merak Films regarding its sources of capital
The only way that this company can ensure that it retains its sources of finances is through ensuring that the investors get a positive return in the long run. The funds acquired through this various sources to ensure that it is well invested so as to guarantee the growth of the business CITATION Placeholder15 \l 1033 (Rudman, 2004).
Ways Merak used funds to ensure its growth
The key factor in the success of every business is planning, a business should regularly review the business plan it has so as to ensure that the goals and objectives are met. The performance of the business should also be reviewed on a regular basis CITATION Wil00 \l 1033 (Williamson, 2000). This ensures that a good strategic growth path is established.
Merak took advantage of the strong production levels in Italy. Films produces in Italy have improved their market share. Public funding have played a major role in ensuring the growth of Merak as a company. The general conditions for a project financing are that, if a project is financing itself, it should be able to source all the required funding's without receiving any support from the public or private sector. (Finnerty, 1996). Having a small home market, and challenges of low level of export Merak has been able to incorporate the art of attracting both the public and private funding's. TV pre-sales is one of the way they used to source funds. In this case, the producer chooses to sell their television distribution rights before the film is taken for production and then uses that as license fee as capital.
Merak had direct equity investment with two films into the production majorly from the television companies, the investment was combined with a pre-sale which split the company's financial contribution. This gave them tremendous return on investment.
Proctor meats limited.
Proctor meats limited commonly known as protégé is a company dealing with meats under the Kenya meat commission. The company was founded in 1982 after the dissolution of Kenya Meats Company which was located in the countries capital, Nairobi. Kenya Meats Company was declared solvent after becoming bankrupt and it was unable to meet its production cost resulting to bad losses there before. The company upon a court ruling was liquidated and major shareholders who had previously served as directors teamed up to form the current proctor meats which is currently a public company owned by shareholders based on the one man one vote strategy; shares are traded on the Nairobi stock exchange. The dare es alaam stock exchange and the Uganda securities exchange.
The company's headquarters are located in Nairobi, Kenya exactly where the old corporation was based. Proctor...