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MK Pty Ltd is a successful chain of frozen yoghurt stores with low gearing - HSC - SSCE Business Studies - Question 22 - 2013 - Paper 1
Question 22
MK Pty Ltd is a successful chain of frozen yoghurt stores with low gearing. The owners are planning to take over a smaller chain which has poor human resource manage... show full transcript
Worked Solution & Example Answer:MK Pty Ltd is a successful chain of frozen yoghurt stores with low gearing - HSC - SSCE Business Studies - Question 22 - 2013 - Paper 1
Step 1
Outline TWO indicators MK Pty Ltd could use to assess the effectiveness of human resource management after the takeover. (i)
Answer
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Staff Turnover: This indicator measures the rate at which employees leave the company. A high staff turnover may signify dissatisfaction among employees, potentially indicating ineffective human resource strategies. A careful analysis of turnover rates post-takeover can provide insights into employee morale and engagement.
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Absenteeism: This refers to the frequency and number of days employees are absent from work. High levels of absenteeism could suggest issues with employee satisfaction and productivity. Monitoring absenteeism can help MK Pty Ltd identify underlying problems in the human resource management of the new company.
Step 2
Outline TWO indicators MK Pty Ltd could use to assess the effectiveness of human resource management after the takeover. (ii)
Answer
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Employee Satisfaction Surveys: Conducting regular surveys can provide direct feedback from employees regarding their feelings about the workplace. The results can help the management to address any dissatisfaction and improve human resource practices.
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Performance Evaluations: Evaluating employee performance allows MK Pty Ltd to track the effectiveness of its recruitment and training processes. Consistent performance metrics can indicate the success of the integration efforts post-takeover.
Step 3
Discuss ONE source of finance to fund the takeover.
Answer
One viable source of finance for MK Pty Ltd to fund the takeover is through long-term debt financing. This method involves borrowing funds with a commitment to repay over an extended period, typically with interest. Long-term debt can provide a substantial amount of capital required for the acquisition without diluting ownership through equity financing.
This method could be beneficial if MK Pty Ltd has a solid business plan to generate sufficient cash flow to cover the debt repayments while continuing to grow. However, it is crucial for the company to consider the risks associated with increasing debt levels, especially in light of the integration of a new business, as this might amplify financial risk if the anticipated revenue does not materialize.