Long-Term Finance Mediums Available essay

The question of long-term finance mainly rests between equity and debt finance. Organization normally adopts a combination of the above mentioned mediums of finance in order to attain the maximum benefits from such mediums and minimize its associated risks. Indeed Cadbury Schweppes is presently adopting a combination of such finance as will be further analyzed in the proceeding sections. Long-Term Finance of Cadbury Schweppes The long-term finance of Cadbury Schweppes for the financial year ended 2006 comprised ? 3,688 million equity and ?

1,840 million debts consisting of borrowings and trade and other payables. The amount of share capital and long-term debt the financed the company prior 2006 consisted of the following: 2005: Share Capital ? 3,008 million Debt ? 3,054 million 2004: Share Capital ? 2,071 million Debt ? 3,547 million Stability and Movement in Long-Term Finance of Cadbury Schweppes The leverage of the company, which consists of the proportion of debt to equity, portrays the financial stability of the company by applying suitable accounting ratios.

These will also further highlight the movement in equity finance over the three year period for Cadbury Schweppes. The accounting ratios are computed in the latter section of this assignment. Originally, in 2004 and 2005 Cadbury Schweppes was a high gearing company as shown by the high gearing ratio, in the next section. This means that there was a high proportion of debt finance in the company. The greater the gearing of the organization the higher the financial commitments arising from such debt borrowings, which necessitate a good financial health for the company.

The management of Cadbury Schweppes managed to diminish the amount of debt finance and increase the equity capital over the three year period examined. In fact, in 2006 the company changed its finance status from a high geared company to a neutral geared firm. This was attained by decreasing debt finance by 48% from ? 3,547 million in 2004 to ? 3,688 million in 2006 and increasing equity finance by 78% from ? 2,071 in 2004 to ? 3,688 in 2006. Such movements in finance enable the company to decrease the risks arising from debt finance due to their financial obligations.