Living Hope Pharmaceutical Company Ghana Limited is a family owner-managed company located in Tema, in the Greater Accra Region of Ghana. This pharmaceutical manufacturing company has developed a new type of diabetic medication that works to restore the pancreas in diabetic patients. The financing of the development stages of this medication has come from the company’s own resources. Market research has indicated the possibility of a large volume of demand. To meet this anticipated demand, a significant amount of additional capital will be needed for finance production.
At a family meeting to deliberate on the funding sources, there was a sharp disagreement among family members. As a member of the family, you have been tasked to brief the family on the usage of internal financing sources.
Briefly, advise Living Hope Pharmaceutical Company Ghana Limited on the following:
i) What factors should Living Hope Pharmaceutical Company Ghana Limited consider in deciding on the use of either equity finance or debt finance? 10 marks
ii) Outline and discuss the merits and demerits of any four (4) internal sources of finance you will recommend for Living Hope Pharmaceutical Company Ghana Limited to consider. 20 marks
