What methods does Focalpoint Coaching use to manage financial risk and ensure sufficient liquidity?
Focalpoint_Coaching Franchise · 2025 FDDAnswer from 2025 FDD Document
The main risks arising from the Company's financial instruments are liquidity risk, interest rate risk, credit risk and currency risk. The directors review and agree policies for managing each of these risks and they are summarized below.
Liquidity Risk:
The Company seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs. The directors' policy is to have bank overdraft available to maintain short-term flexibility, as well as financial commitments by shareholders in the event of liquidity needs of the Company.
Interest Rate Risk:
The Company finances its operations through a mixture of retained profits and bank overdraft where required. The Company exposure to interest rate fluctuation on its borrowings is managed by the use of both fixed and floating facilities.
Credit Risk:
The Company's principal financial assets are cash, and accounts receivable. The risk associated with cash is limited, principal credit risk likes with accounts receivable.
In order to manage credit risk the directors utilize set limits for customers based on a combination of payment history and third-party credit references. Credit limits are reviewed on a regular basis in conjunction with debt aging and collection history.
Source: Item 21 — Financial Statements (FDD page 56)
What This Means (2025 FDD)
According to Focalpoint Coaching's 2025 Franchise Disclosure Document, the company addresses financial risks such as liquidity risk, interest rate risk, credit risk, and currency risk through policies reviewed and agreed upon by its directors. To manage liquidity risk, Focalpoint Coaching aims to maintain sufficient liquidity to cover foreseeable needs. This is achieved through a bank overdraft for short-term flexibility and financial commitments from shareholders to address any liquidity shortfalls.
To mitigate interest rate risk, Focalpoint Coaching uses a combination of retained profits and bank overdrafts to finance its operations. The company manages its exposure to interest rate fluctuations by utilizing both fixed and floating interest rate facilities. This approach allows Focalpoint Coaching to balance the stability of fixed rates with the potential cost savings of floating rates.
Regarding credit risk, Focalpoint Coaching's primary financial assets are cash and accounts receivable. While the risk associated with cash is considered limited, the main credit risk lies within accounts receivable. To manage this, the directors set customer credit limits based on payment history and third-party credit references. These credit limits are regularly reviewed in conjunction with debt aging and collection history to ensure they remain appropriate and effective. These measures collectively aim to safeguard Focalpoint Coaching's financial stability and minimize potential losses from various financial risks.