FINANCIAL STRUCTURE OF CONSTRUCTION FIRMS, LEVERAGE AND LIQUIDITY

1. FINANCIAL STRUCTURE OF CONSTRUCTION FIRMS, LEVERAGE AND LIQUIDITY Presented by Christopher kaniiru m’ ithai B50/71686/08

2. Introduction Finance is an important theme of management. After all the objectives of the organisations are normally expressed in financial terms as are many of targets used to assess the performance of the organisation. Increasingly, senior positions in the management of organizations are occupied by those with financial management training and experience. The main two financial objectives are; • Liquidity in the short term meaning that cash flow or working capital is generated, thus enabling debts to be paid and the firm’s current activities to be financed. • (b) Profitability in long term, meaning that the surplus and revenues over costs, thus enabling the cycle of production to be renewed over time, and funds to be provided for replacing capital and expansion of activities.

3. Capital structure Capital structure relates to proportions of total capital which are on the hand, borrowed funds and on the other hand equity (owners’) funds. This proportion is known as gearing capital. The higher the proportion of borrowed funds to owners funds, that is non-equity to equity then the higher is said to be the gearing. In deciding what gearing strategy a firm should adopt some of the points to be considered are:- • Lenders will feel their investment is fairly secure if there are sufficient shareholders to carry the risk therefore, the firm will be able to borrow at reasonable rates of interest. • However as borrowing increase- that becomes higher- lenders will feel less secure as the number of shareholders taking the risk diminishes. Therefore higher interest rates will be demanded as risk premium. • Shareholders may be attracted by higher gearing because in times of high profit the lenders will receive a fixed return, leaving a great amount to be shared among the fewer equity shareholders.

4. Capital structure cont’d • However shareholders in this highly geared situation are carrying a more concentrated risk, so they require a higher potential return to attract them. • The management of a firm wishes to undertake fast growth, the higher borrowing may be the only way to raise the required funds quickly enough. Choices have to be made balancing all these factors. If there is a booming property market there may be temptation to strive for fast growth by borrowing heavily. This carries risk that if interest rates rise, the regular debt payment will soar, threatening the survival of the firm due to lack of liquidity. This is an all too familiar story in the construction and property industries of the 1990s following the boom and subsequent bust of late 1980s.

5. Capital structure cont’d • PUBLIC FINANCE STRUCTURE • Organizational structure The finance and project structure are indistinguishable. The public sector is responsible for financing, developing and operating the asset. There is no separate contractual arrangement for financing projects • Capital Structure Public institutions borrow funds to finance projects usually the government gives a sovereign guarantee to lender to repay all funds. Project funding might be raised from a combination of equity and debt. The debt will be shown as a liability on the government’s balance sheet.

6. Capital structure cont’d • Corporate Finance Structure • This type of project finance structure is associated with private sector institutions using their own capital for funding projects. This mainly applies to projects that are limited in size and do not require outside financing. This is due to the fact that private companies are able to absorb this financial commitment in their balance sheet • Organizational Structure • Project finance is not a separate incorporation of the private company, under this scheme the private companies existing structure would govern the project/asset am dots cash flows. By doing so, private companies could hold large risky assets on their balance sheets

7. Capital structure cont’d • Capital Structure • A private company may choose to use its own equity or to borrow funds to develop the asset in question and guaranties to repay lenders from its available operating income and its capital of assets Loans under this system are based on the recourse debt method. Each project has its own characteristics that may alter the standard format of the optimal capital structure. suggested that corporate capital structure is influenced by variables such as fixed assets, no – debt tax shield, investment opportunities, firm size, volatility probability of bankruptcy and the uniqueness of the product or service offered by the firm.

8. Capital structure cont’d • Project Finance Structure • Project finance is defined as the creation of a legally independent project company financed with non-recourse debt for the purpose of investing in a capital asset, usually with a single purpose and limited life. Project financing uses the projects future revenues as the basis for raising capital to fund the construction and operation of an asset over a specified period. The system is based on the paradigm that the private sector uses its resources to build, maintain manage and operate public assets. Project financings are extremely complex. It may take a much longer time to structure, negotiate and document a project financing than a traditional financing, and the legal fees and related costs associated with project financing can be very high.

9. SOURCES OF FINANCE All individuals and organizations need a variety of types of finance for different purposes. This is equally true to firms as it is for consumers, households and the government. For instance a family contemplating the purchase of a house is unlikely to finance this by a bank overdraft but will instead turn to a specially designed source of finance for this purpose namely a mortgage. Similarly, firms need certain types of finance to provide for their short-term day to day needs of maintaining liquidity and other types to provide funds for long term investment which lays the foundation for profitability. Therefore to summarise financial needs: • Short-term finance is required to meet the objective of liquidity. • Long-term finance is required to meet the objective of profitability

10. Sources of Finance cont’d Short-Term Finance • Short-term finance is required to maintain liquidity, and therefore the source of working capital to keep the firm operating on daily basis. Many firms fail through lack of liquidity rather than lack of long –term profitability. Firm may use short-term finance in a number of ways • Hold cash balances to pay immediate bills and for emergencies • Extend credit to customers –that is – provide debtors possibly in accordance standard practice in a given industry. • Hold stock of finished goods awaiting sale or delivery to customers. • Hold stocks of materials and components awaiting incorporation into the production process. • Pay for work in progress in case of the ongoing works in construction projects • The more working capital that is tied up in items, the greater the strain on firm’s finances.

11. Sources of Finance cont’d The main types of short term finances available are: • Bank credit: Overdrafts work on the basis that is granted certain drawing rights by the bank up to a prescribed limit. Thus the firm borrows on a flexible basis according to its needs at a given time. Therefore the faster it is able to collect debt then the less interest charges will be incurred. So construction projects, the quicker a contractor receives interim payments from clients the better. • Trade Credit: This has always been a standard practice in construction and many other industries. Essentially, it means that goods are supplied on credit basis. A certain period, within which payment must be made, is normally prescribed, be it 14days, 21days, 28days e.t.c. A firm using trade credit is therefore using somebody else’s money to finance its activities. This means that it is using the other firm, or creditor, as if it were a bank. Using firms as creditors is the other side of the coin to extending credit to firms, as described above.

12. Sources of Finance cont’d • Factoring This type of credit involves the use of a third party to collect debts on a routine basis. Factors may be specialists, financial organizations or subsidiaries of more general financial institutions. Where factoring is used, all invoices are issued through the factor, thus breaking a direct contract between supplier and customer. This is a possible disadvantage, although it should be noted that the supplier’s name will still appear, possibly with some qualifying word or phrase in brackets-‘Samuel (sales)’, instead of plain ‘Samuel’. The way the system normally operates is that the factor will pay the firm a substantial proportion of the invoice value immediately, thus improving cash flow

13. Sources of Finance cont’d • Factoring • This type of credit involves the use of a third party to collect debts on a routine basis. Factors may be specialists, financial organizations or subsidiaries of more general financial institutions. Where factoring is used, all invoices are issued through the factor, thus breaking a direct contract between supplier and customer. This is a possible disadvantage, although it should be noted that the supplier’s name will still appear, possibly with some qualifying word or phrase in brackets-‘Samuel (sales)’, instead of plain ‘Samuel’. The way the system normally operates is that the factor will pay the firm a substantial proportion of the invoice value immediately, thus improving cash flow.

14. Sources of Finance cont’d • Long-term finance • Long term-finance is for investment in assets which will be used to enhance profitability in the long term. These assets may include: • Tangible items or fixed assets such as land, buildings, machinery and vehicles. • Intangible assets such as goodwill, which may be built up over time. • These intangible items may be difficult to measure and value but certainly count as investment assets because finance would have been expended on them, perhaps in the form of employee training which has a long term benefit for the effectiveness and reputation of the firm. • There are basically two main sources of long term finance: • Owners’ funds • Borrowed funds

15. Sources of Finance cont’d • Owner’s funds, these include: • Funds provided by the original entrepreneur to start the company. • Receipts from shares sold if the company ‘goes public’. • Any ploughed back profit retained in the business. • These funds represent the permanent capital of the firm. • In theory the owners, or shareholders, are risk-taking investors and will be prepared to forego an income now in exchange for a greater return in the future. Borrowed funds • Funds may be borrowed from a number of sources, but share the characteristic that they represent a regular drain on the firm’s financial resources due to interest charges. The most straight forward way to borrow is from banks or some other financial institutions on a long-term basis.

16. Sources of Finance cont’d • Financial Institutions • Financial Institution is the general term used in the property industry to describe pension funds, insurance companies, life assurance companies, investment trusts and unit trusts. They invest in property directly and indirectly through the ownership of shares in property investment companies and development companies Banks and building societies • Banks who participate in the funding of development include both local and foreign clearing and merchant banks. Bank lending may take the form of “corporate” lending to a company by means of overdraft facilities or short-term loans.

17. Sources of Finance cont’d • Joint venture partners: A development company may raise finance to secure the acquisition of land by forming a partnership or a joint venture company with their party to carry out a specific development projects. The basic principles behind forming a partnership from the developers’ point of view is to secure either finance or land in return for a share in the profits of the development scheme or the joint venture company. • Government assistance: There are grants available from the government to developers directly or through a partnership with local authorities. • Methods of Development Finance: There are many methods of obtaining development finance from the various sources of development finance cited above. The choice of both source and method of development finance will depend on how much equity (the construction firm own capital) that the firm is able and willing to commit to a scheme.

18. Sources of Finance cont’d • Forward – funding with an institution: Forward-funding is the method of development finance which involves a pension fund or insurance company agreeing to provide short-term development finance and to purchase the completed property as an investment. • Bank loans :For many firms, especially the smaller ones, forward-funding is difficult to obtain as they are unable to provide the requested guarantees. • Corporate loans: Development companies can arrange overdraft facilities or loan facilities with clearing banks secured on their assets. With corporate lending the bank is concerned with the strength of the company, its assets, profits and cash-flow. Corporate loans can be obtained at lower interest rates than project loans. • Project loans: Project loans can be arranged which are secured against a specific development project. Banks normally provide loans which represent 65-70% of the development value or 70-80% of the development cost. The banks limit their total loan to allow for the risk of a reduction in value of the scheme during the period of the loan

19. Sources of Finance cont’d Project loans are attractive to the smaller trading companies as they are not worth enough to fund their full development program through corporate loans. There are variations on the basic project loan. These include; • Investment loans – Development companies wishing to retain a development, can secure the option to convert the project loan into an investment loan on the completion of the project once is let, usually up until the first rent review. Alternatively the developer may agree a combined project and investment loan from the outset. • “Mezzanine” finance – A project loan may be split into different layers known as “senior” debt and “mezzanine” debt if the developer is unable to provide the normal equity requirement or wishes to increase the amount of the loan above the normal loan to cost ratios. The ‘senior’ debt usually represents the first 70% of the cot of the development scheme like a straight forward project loan. This debt may represent more than 70%. If the development is pre-let or pre-sold. When a developer wants to borrow more of the cost of the project than 70%, additional money may be raised in the form of ‘mezzanine’ finance.

20. Sources of Finance cont’d (c) Syndicated project loans – the necessary development finance may need to be borrowed from more than one bank. In particular, large loans are more likely to be syndicated among a group of banks by a ‘lead’ or agent bank. (d) Interest rate options – the development company may wish to protect themselves from the risk of change in the base rate over the period of the development project, particularly when the market is uncertain, in this instance the developer may seek fixed interest loans which may tie it to a high rate of interest for along time so that they may not be able to gain from subsequent reductions.

21. Sources of Finance cont’d • Corporate finance There are various methods available of raising equity and debt finance from institutional investors via the stock exchange. These include: (a) Equity finance which may be through: new shares, right issues or retained earnings (b) Debt finance: Debt finance instruments may be secured on specific property assets or the property assets of the company as a whole. This is done by use Bonds: A bond is effectively on ‘I owe you’ note secured on a specific investment property Debentures – These are securities which can be traded on the stock market. They are issued by companies to institutional investors whereby the institution effectively lends money at a rate of interest below market levels in return for a share in the company’s potential growth.

22. LIQUIDITY PLANNING AND LEVERAGE Leverage Means the use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged. Leverage is most commonly used in real estate transactions through the use of mortgages to purchase a home. Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk.

23. Liquidity Planning And Leverage Cont’d The Balance Sheet and the Statement of Income are essential, but they are only the starting point for successful financial management. Apply Ratio Analysis to Financial Statements to analyze the success, failure, and progress of your business. Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry.

24. Liquidity Planning And Leverage Cont’d • Balance Sheet Ratio Analysis: Important Balance Sheet Ratios measure liquidity and solvency (a business's ability to pay its bills as they come due) and leverage (the extent to which the business is dependent on creditors' funding). They include the following ratios: • Liquidity Ratios: These ratios indicate the ease of turning assets into cash. They include the Current Ratio, Quick Ratio, and Working Capital. • Current Ratios: The Current Ratio is one of the best known measures of financial strength. It is figured as shown below: • Current Ratio = Total Current Assets / Total Current • LiabilitiesThe main question this ratio addresses is: "Does your business have enough current assets to meet the payment schedule of its current debts with a margin of safety for possible losses in current assets, such as inventory shrinkage or collectable accounts?"

25. Liquidity Planning And Leverage Cont’d • If you feel your business's current ratio is too low, you may be able to raise it by: • Paying some debts. • Increasing your current assets from loans or other borrowings with a maturity of more than one year. • Converting non-current assets into current assets. • Increasing your current assets from new equity contributions. • Putting profits back into the bus

26. Liquidity Planning And Leverage Cont’d • Quick Ratios: The Quick Ratio is sometimes called the "acid-test" ratio and is one of the best measures of liquidity. It is figured as shown below: • Quick Ratio = Cash + Government Securities + Receivables / Total Current LiabilitiesThe Quick Ratio is a much more exacting measure than the Current Ratio. By excluding inventories, it concentrates on the really liquid assets, with value that is fairly certain. It helps answer the question: • An acid-test of 1:1 is considered satisfactory unless the majority of your "quick assets" are in accounts receivable, and the pattern of accounts receivable collection lags behind the schedule for paying current liabilities.

27. Liquidity Planning And Leverage Cont’d • Working Capital: Working Capital is more a measure of cash flow than a ratio. The result of this calculation must be a positive number. It is calculated as shown below: • Working Capital = Total Current Assets - Total Current Liabilities • Bankers look at Net Working Capital over time to determine a company's ability to weather financial crises. Loans are often tied to minimum working capital requirements. • Leverage Ratio: This Debt/Worth or Leverage Ratio indicates the extent to which the business is reliant on debt financing (creditor money versus owner's equity): • Debt/Worth Ratio = Total Liabilities / Net WorthGenerally, the higher this ratio, the more risky a creditor will perceive its exposure in your business, making it correspondingly harder to obtain credit

28. Liquidity Planning And Leverage Cont’d • Income Statement Ratio AnalysisThe following important State of Income Ratios measure profitability: ()Gross Margin Ratio This ratio is the percentage of sales dollars left after subtracting the cost of goods sold from net sales. It measures the percentage of sales dollars remaining (after obtaining or manufacturing the goods sold) available to pay the overhead expenses of the company. • Comparison of your business ratios to those of similar businesses will reveal the relative strengths or weaknesses in your business. The Gross Margin Ratio is calculated as follows: • Gross Margin Ratio = Gross Profit / Net SalesReminder: Gross Profit = Net Sales - Cost of Goods Sold

29. Liquidity Planning And Leverage Cont’d • Net Profit Margin Ratio:This ratio is the percentage of sales dollars left after subtracting the Cost of Goods sold and all expenses, except income taxes. It provides a good opportunity to compare your company's "return on sales" with the performance of other companies in your industry. It is calculated before income tax because tax rates and tax liabilities vary from company to company for a wide variety of reasons, making comparisons after taxes much more difficult. The Net Profit Margin Ratio is calculated as follows: • Net Profit Margin Ratio = Net Profit Before Tax / Net Sales • Management Ratios: Other important ratios, often referred to as Management Ratios, are also derived from Balance Sheet and Statement of Income information. • Inventory Turnover Ratio: This ratio reveals how well inventory is being managed. It is important because the more times inventory can be turned in a given operating cycle, the greater the profit. The Inventory Turnover Ratio is calculated as follows: • Inventory Turnover Ratio = Net Sales / Average Inventory at Cost

30. Liquidity Planning And Leverage Cont’d • Accounts Receivable Turnover Ratio: This ratio indicates how well receivables accounts are being collected. If receivables are not collected reasonably in accordance with their terms, management should rethink its collection policy. If receivables are excessively slow in being converted to cash, liquidity could be severely impaired. Getting the Accounts Receivable Turnover Ratio is a two step process and is calculated as follows: • Daily Credit Sales = Net Credit Sales Per Year / 365 (Days) Accounts Receivable Turnover (in days) = Accounts Receivable / Daily Credit SalesReturn on Assets Ratio: This measures how efficiently profits are being generated from the assets employed in the business when compared with the ratios of firms in a similar business. A low ratio in comparison with industry averages indicates an inefficient use of business assets. The Return on Assets Ratio is calculated as follows: • Return on Assets = Net Profit Before Tax / Total Assets

31. Liquidity Planning And Leverage Cont’d • Return on Investment (ROI) Ratio:The ROI is perhaps the most important ratio of all. It is the percentage of return on funds invested in the business by its owners. In short, this ratio tells the owner whether or not all the effort put into the business has been worthwhile. If the ROI is less than the rate of return on an alternative, risk-free investment such as a bank savings account, the owner may be wiser to sell the company, put the money in such a savings instrument, and avoid the daily struggles of small business management. The ROI is calculated as follows: • Return on Investment = Net Profit before Tax / Net WorthThese Liquidity, Leverage, Profitability, and Management Ratios allow the business owner to identify trends in a business and to compare its progress with the performance of others through data published by various sources. The owner may thus determine the business's relative strengths and weaknesses

32. FINANCIAL STATEMENTS • Financial statements are formal records of the financial activities of a business, person, or other entity. • An enormous amount of financial information exists about a firm, and there are legal obligations that some of this information has to be published and made available for investors, customers and the public at large. Financial includes: 1) Balance sheet: also referred to as statement of financial position or condition, reports on a company's assets, liabilities, and ownership equity at a given point in time. The reason for this is that the balance sheet does not measure performance over a period of time, but is more of an instantaneous ‘snapshot’

33. Financial Statements cont’d 2) Income statement: also referred to as Profit and Loss statement (or a "P&L"), reports on a company's income, expenses, and profits over a period of time. Profit & Loss account provide information on the operation of the enterprise. These include sale and the various expenses incurred during the processing state. 3) Statement of retained earnings: explains the changes in a company's retained earnings over the reporting period. 4) Statement of cash flows: reports on a company's cash flow activities, particularly its operating, investing and financing activities

34. Financial Statements cont’d Purpose of financial statements • The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decision. • Owners and managers require financial statements to make important business decisions that affect its continued operations. Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor union or for individuals in discussing their compensation, promotion and rankings. • Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and are prepared by professionals (financial analysts), thus providing them with the basis for making investment decisions.

35. Financial Statements cont’d • Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures. • Government entities (tax authorities) need financial statements to ascertain the propriety and accuracy of taxes and other duties declared and paid by a company. • Vendors who extend credit to a business require financial statements to assess the creditworthiness of the business. • Media and the general public are also interested in financial statements for a variety of reasons.

36. TYPES OF LEGAL BUSINESS ENTITIES One of the first decisions that you will have to make in starting a firm is how it should be structured. This decision will have long-term implications, and you may wish to consult with an accountant and/or attorney to help you select the form of ownership that is best for you. The choice will involve some of the following considerations: • The size and nature of the firm, both now and in the future. • The level of control you wish to exercise. • The level of structure you are willing to deal with. • The firm's vulnerability to lawsuits. • Tax implications of the relevant structures. • Expected profit (or loss) of the business.

37. Types Of Legal Business Entities Cont’d 1) Sole Proprietorships: Solo firms are the classic vision of the practice of law. The solo firm is owned by one person. Sole proprietors own all the assets of the firm and the profits generated by it. They also assume complete responsibility for any of its liabilities or debts. In the eyes of the law and the public, the owner is one in the same with the solo firm. Advantages of a Sole Proprietorship • Easiest and least expensive form of ownership to organize. • Sole proprietors are in complete control, and within the parameters of the law, may make decisions as they see fit. • Sole proprietors receive all income generated by the business to keep or reinvest. • Profits from the business flow directly to the owner's personal tax return. • The business is easy to dissolve, if desired.

38. Types Of Legal Business Entities Cont’d Disadvantages of a Sole Proprietorship • Sole proprietors have unlimited liability and are legally responsible for all debts against the business. Their business and personal assets are at risk. • May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans. • May have a hard time attracting high-caliber staff. • Some employee benefits such as owner's medical insurance premiums are not directly deductible from business income (only partially deductible as an adjustment to income).

39. Types Of Legal Business Entities Cont’d 2) Partnerships • In a Partnership, two or more people share ownership of a firm. Like proprietorships, the law does not distinguish between the business and its owners. The partners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, and what steps will be taken to dissolve the partnership when needed. • Advantages of a Partnership • Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement. • With more than one owner, the ability to raise funds may be increased. • The profits from the business flow directly through to the partners' personal tax returns. • Prospective employees may be attracted to the business if given the incentive to become a partner. • The business usually will benefit from partners who have complementary skills.

40. Types Of Legal Business Entities Cont’d Disadvantages of a Partnership • Partners are jointly and individually liable for the actions of the other partners. • Profits must be shared with others. • Since decisions are shared, disagreements can occur. • Some employee benefits are not deductible from business income on tax returns. • The partnership may have a limited life; it may end upon the withdrawal or death of a partner.

41. Types Of Legal Business Entities Cont’d Types of Partnerships that should be considered: • General Partnership: Partners divide responsibility for management and liability as well as the shares of profit or loss according to their internal agreement. Equal shares are assumed unless there is a written agreement that states differently. • Limited Partnership and Partnership with limited liability“: Limited" means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decisions, which generally encourages investors for short-term projects or for investing in capital assets. This form of ownership is not often used for operating retail or service businesses. Forming a limited partnership is more complex and formal than that of a general partnership • Joint Venture: Acts like a general partnership, but is clearly for a limited period of time or a single project. If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such as well as distribute accumulated partnership assets upon dissolution of the entity.

42. Types Of Legal Business Entities Cont’d 3) Limited Liability Company (LLC): The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership. • The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued, if desired, by a vote of the members at the time of expiration.

43. Types Of Legal Business Entities Cont’d 4)Limited Liability Partnership (LLP) • LLPs are organized to protect individual partners from personal liability for the negligent acts of other partners or employees not under their direct control. LLPs are not recognized by every state and those that do sometimes limit LLPs to organizations that provide a professional service, such as medicine or law, for which each partner is licensed. Partners report their share of profits and losses on their personal tax returns. 5) Professional Service Corporation (PS) • A PS must be organized for the sole purpose of providing a professional service for which each shareholder is licensed. The advantage here is limited personal liability for shareholders.

44. Types Of Legal Business Entities Cont’d Limited Partnership (LP) • LPs have complex formation requirements, and require at least one general partner who is fully responsible for partnership obligations and normal business operations. The LP also requires at least one limited partner, often an investor, who is not involved in everyday operations and is shielded from liability for partnership obligations beyond the amount of their investment. LPs do not pay tax, but must file a return for informational purposes; partners report their share of profits and losses on their personal returns. Non-Profits • These are formed for civic, educational, charitable, and religious purposes and enjoy tax-exempt status and limited personal liability. Non-profit corporations are managed by a board of directors or trustees. Assets must be transferred to another non-profit group if the corporation is dissolved.

45. REFFERENCES • Stephen L (1996) management of construction industry, Addison Wesly Longman • "Presentation of Financial Statements" Standard IAS 1, International Accounting Standards Board. Accessed 24 June 2007. • http://www.zeromillion.com/business/financial/financial-ratio.html#ixzz0XY61SeQu • Jordan W R (2006) fundamentals of corporate finance 7th edition McGraw-hill • Brooks, Rory, and Jim Read. "Mezzanine Gains Ground." Investors Chronicle. October 21, 1994. • Campbell, Katharine. "Development Capital is Industrial Strength." Financial Times. December 2, 1997. • Gross, Kent, and Amin Amiri. "Flexible Financing with Mezzanine Debt." Journal of Business Strategy. March-April 1990.

46. END Thank you.