A proprietary limited company is a legal entity that operates as a separate entity from its shareholders and directors.
One of the key characteristics of a proprietary limited company is limited liability. This means that the liability of the company’s shareholders is limited to the amount they have invested in the company. In the event of financial losses or legal claims against the company, the personal assets of shareholders are generally protected from being used to settle the company’s debts.
A proprietary limited company is owned by its shareholders, who hold shares in the company. The ownership structure can vary, with some companies having a single shareholder while others may have multiple shareholders.
The day-to-day operations of a proprietary limited company are typically managed by its directors. They are responsible for making strategic decisions, ensuring compliance with laws and regulations, and overseeing the company’s affairs.
Proprietary limited companies are subject to various regulatory requirements and compliance obligations under company law. Failure to meet these requirements can result in penalties or legal consequences for the company and its directors.
As a separate legal entity, a proprietary limited company has the ability to raise capital by issuing shares to investors. This can facilitate growth and expansion opportunities for the company by providing access to additional funds for investment in assets, technology, research and development, and other business activities.
John and Jane decide to start a small software development company together. They choose to register their business as a proprietary limited company to limit their personal liability and protect their personal assets. For example, if the company encounters financial difficulties and is unable to repay its debts, creditors can only pursue the company’s assets, not John and Jane’s personal assets. This structure provides peace of mind to John and Jane while allowing them to pursue their business venture with confidence.
The South African Institute of Chartered Accountants (SAICA) is a professional accounting body in South Africa that represents chartered accountants and accounting professionals.
SAICA plays a key role in regulating the accounting profession, promoting excellence in accounting education and training, and contributing to the development of the accountancy profession in South Africa.
SAICA is responsible for the education and training of potential chartered accountants in South Africa. It offers various pathways to becoming a chartered accountant, including undergraduate and postgraduate accounting programs, as well as training contracts with approved employers.
Additionally, SAICA provides ongoing professional development opportunities for its members to enhance their skills, knowledge, and competencies throughout their careers. This includes continuing professional education programs, seminars, workshops, and networking events.
The Institute represents the interests of its members and the accounting profession at large in South Africa. It engages with government agencies, regulatory bodies, and other stakeholders to support policies and reforms that promote the growth, integrity, and sustainability of the accounting profession and the broader economy.
Furthermore, SAICA conducts research and publishes reports on various topics relevant to the accounting profession and the business environment in South Africa. It aims to contribute to thought leadership, innovation, and best practices in accounting and business management.
The SACU-EFTA FTA refers to the free trade agreement (FTA) between the Southern African Customs Union (SACU) and the European Free Trade Association (EFTA).
The SACU-EFTA FTA aims to promote trade liberalisation between the member countries by reducing or eliminating tariffs and other trade barriers on goods traded between the two regions. This creates opportunities for increased trade and investment flows, leading to economic growth and development.
The FTA establishes rules of origin criteria to determine the eligibility of goods for tariff treatment. These rules specify the criteria that must be met for goods to qualify as originating from either SACU or EFTA countries, ensuring that only goods produced within the respective regions benefit from tariff preferences.
In addition to trade in goods, the SACU-EFTA FTA may also include regulations related to trade in services and investment. This may involve commitments to liberalise trade in services sectors, such as financial services, telecommunications, and professional services, as well as provisions to protect and promote investment flows between the two regions.
The SACU-EFTA FTA may also include regulations for cooperation and capacity building initiatives to support the implementation of the agreement and improve the trade and economic relationship between the member countries. This may involve technical assistance, training programs, and other forms of support to strengthen institutions and build regulatory capacity.
For instance, let’s say South African farmers want to export their organic produce to Norway. Thanks to the SACU-EFTA FTA, they can do so with reduced or eliminated tariffs, making their products more competitive in the Norwegian market. Likewise, Norwegian manufacturers can export machinery and equipment to South Africa under favourable trade conditions, fostering economic cooperation and growth between the two regions.
A payment reference number (PRN) is a unique identifier assigned to a specific payment transaction to facilitate accurate and efficient processing by banks and financial institutions.
The primary purpose of a payment reference number is to ensure that payments are correctly allocated to the intended recipient or account. It serves as a reference or identifier that links the payment to a specific invoice, bill, or transaction.
PRNs are typically generated by the entity or organisation requesting payment. They may be generated electronically through billing or invoicing systems or manually assigned by the payer when making a payment.
These numbers are alphanumeric codes consisting of a combination of letters, numbers, or special characters. They are designed to be unique to each payment transaction, helping to prevent duplication or confusion. Banks and financial institutions use PRNs to match incoming payments with the relevant recipient accounts or invoices. PRNs are included in electronic payment messages and bank records.
PRNs streamline the payment process for both parties involved, reducing the risk of errors, delays, and misallocations. They improve transparency and accountability in financial transactions by providing a clear reference point for auditing and reconciliation purposes. PRNs also facilitate efficient communication and coordination between payers and recipients, particularly in cases where multiple payments need to be reconciled against specific accounts or invoices.
John Smith is making a payment of R500 to his utility company for his monthly electricity bill. The utility company provides him with a payment reference number. The payment reference number assigned to John’s payment is “ELEC2023-05-123456789.” John includes this reference number when making the payment online or through his bank’s mobile app. This ensures that the utility company can easily identify and allocate John’s payment to his electricity account.
The Payments Association of South Africa (PASA) is an organisation established to facilitate safe, efficient, and reliable payment systems in South Africa.
Payments Association of South Africa’s primary purpose is to coordinate and oversee the functioning of payment systems within South Africa, ensuring their safety, efficiency, and integrity. PASA operates under the oversight of the South African Reserve Bank (SARB) to ensure compliance with relevant regulations and standards governing payment systems.
PASA plays a key role in facilitating various payment systems and services, including electronic funds transfers (EFT), card payments, and real-time gross settlement (RTGS) systems. It establishes rules, standards, and procedures to govern payment systems and promote interoperability among different payment service providers.
PASA operates through various committees and working groups dedicated to specific aspects of payment systems, such as risk management, security, and innovation. It collaborates with stakeholders from the public and private sectors to address emerging challenges, increase the resilience of payment systems, and promote innovation and best practices in the industry.
Additionally, PASA promotes innovation and the adoption of new technologies in payment systems to enhance convenience, security, and accessibility for consumers and businesses. It facilitates the development and implementation of new payment solutions, such as mobile payments, digital wallets, and instant payment systems, to meet the evolving needs of the market.
Ransomware is a type of malware designed to encrypt files or lock down computer systems, with the intention of getting payments from victims in exchange for restoring access to their data or systems.Â
Ransomware is a significant cybersecurity threat that can have major consequences for individuals, businesses, and organisations. It typically works by encrypting files on the victim’s computer or network, making them inaccessible without the decryption key. Some ransomware variants may also lock down entire computer systems, preventing users from accessing their operating system or files until the ransom is paid.
After encrypting files or locking down systems, ransomware displays a ransom demand to the victim, usually in the form of a message or notification on the affected device. The ransom demand typically instructs the victim to pay a sum of money to obtain the decryption key or regain access to their files or systems.
Ransomware attacks can have severe consequences for victims, including data loss, financial loss, operational disruption, and reputational damage. Businesses and organisations may suffer downtime, loss of productivity, and damage to customer trust and confidence as a result of ransomware attacks.
Preventing ransomware attacks requires a multi-layered approach to cybersecurity, including implementing robust security measures, keeping systems and software updated with the latest security patches, and educating users about cybersecurity best practices. Regularly backing up important data and storing backups offline or in a secure location can reduce the impact of ransomware attacks by allowing affected systems to be restored without paying the ransom.
A user unknowingly downloads a file attachment from an email claiming to be an important document. Upon opening the attachment, the user unintentionally executes the ransomware, which begins encrypting files on the user’s computer and displaying a ransom demand.
The ransom demand instructs the user to pay a specified amount of cryptocurrency within a given timeframe to receive the decryption key and regain access to their encrypted files. Faced with the threat of permanent data loss, the user is left with the difficult decision of whether to pay the ransom or seek alternative solutions, such as data recovery or restoration from backups.
Malware, short for malicious software, refers to any software specifically designed to disrupt, damage, or gain unauthorised access to computer systems, networks, or devices.
Malware represents a significant cybersecurity threat, posing risks to individuals, businesses, and organisations worldwide.
Types of malware:
Effective cybersecurity measures can help prevent malware infections, including using reputable antivirus software, keeping systems and software updated with security patches, implementing firewalls and intrusion detection systems, and educating users about safe computing practices.
Antivirus software and other security tools can also help detect and remove malware infections from systems. However, some sophisticated malware variants may dodge detection or require manual removal techniques.
A user receives an email with an attachment claiming to be an invoice from a legitimate company. Upon opening the attachment, a Trojan malware is executed, silently installing itself on the user’s computer. The Trojan then begins to collect sensitive information from the user’s system and sends it to a remote server controlled by cybercriminals.
In this example, the Trojan horse malware disguises itself as a harmless file attachment but actually carries out harmful activities, compromising the security and privacy of the user’s computer.
A challenger bank is a relatively new type of financial institution that challenges the traditional banking model by offering innovative and customer-focused banking services primarily through digital channels.
Challenger banks are often startups or smaller institutions compared to traditional banks and aim to disrupt the industry by providing improved user experiences, lower fees, and more transparent services.
These banks prioritise user experience by offering intuitive interfaces, quick account setup processes, and personalised financial management tools. They aim to make banking more efficient and enjoyable for customers. Additionally, the banks often introduce innovative features that differentiate them from traditional banks. This may include real-time transaction notifications, automated savings tools, budgeting assistance, and integration with third-party financial services.
Challenger banks typically have lower overhead costs compared to traditional banks, allowing them to offer competitive interest rates on savings accounts, reduced or no fees for basic banking services, and favourable foreign exchange rates.
Furthermore, challenger banks often target specific demographic groups or niche markets that may be underserved by traditional banks, such as freelancers, immigrants, or small businesses. By understanding the unique needs of these segments, challenger banks can tailor their offerings accordingly.
Despite their disruptive nature, challenger banks are subject to the same regulatory requirements as traditional banks. Ensuring compliance with these regulations is essential for maintaining trust and credibility with customers.
BankX, an emerging challenger bank, reshapes banking norms with its tech-forward approach. Offering zero-fee accounts and instant peer-to-peer payments, BankX prioritises convenience. Its ‘SmartSaver’ tool intelligently allocates funds into savings based on spending habits. Customers benefit from real-time transaction categorisation and personalised budgeting tips, making financial management a breeze. BankX’s commitment to innovation and customer empowerment marks it as a challenger in the banking industry.
Burn rate in business finance refers to the rate at which a company is spending its available cash reserves or funds over a specific period.
A burn rate indicates how quickly a company is using its financial resources and provides valuable insight into its financial sustainability. The formula for calculating the burn rate is:
Burn rate = Total expenses / Time period
Burn rate reflects the amount of cash a company is “burning through” to cover its expenses. This includes salaries, rent, utilities, marketing costs, research and development expenses, and any other operational costs. It serves as a key metric for assessing a company’s financial health. A high burn rate relative to available funds indicates that the company may run out of cash quickly if it does not generate additional revenue or secure additional financing.
Startups and high-growth companies may have high burn rates as they invest heavily in product development, marketing, and customer acquisition to capture market share and scale their operations.
Investors closely monitor a company’s burn rate as part of their due diligence process, especially in the startup and early-stage investment landscape. A high burn rate may raise concerns about the company’s ability to achieve profitability or secure additional funding to sustain its growth path.
Company XYZ has R500,000 in cash reserves. Over the past month, it spent R50,000 on salaries, R20,000 on rent, R15,000 on utilities, and R10,000 on marketing, totalling R95,000 in expenses.
Using the formula above, the burn rate is calculated as:
Burn rate = R95,000 / 1 month
Burn rate = R95,000 per month
So, Company XYZ’s burn rate is R95,000 per month, meaning it is spending R95,000 of its cash reserves each month to cover its expenses.
Retained earnings refer to the portion of a company’s net income that is not distributed to shareholders as dividends but is instead retained and reinvested in the business.Â
Retained earnings represent the sum of all past profits that have been reinvested in the company since its beginning, minus any dividends or other distributions to shareholders. They serve as a source of internal financing for various purposes such as funding expansion projects, research and development, debt repayment, or other investments aimed at increasing the company’s value and competitiveness in the market.
Retained earnings accumulate over time as a result of profitable operations. They are derived from the net income generated by the company after deducting all expenses, taxes, and dividends.
While retained earnings are not directly distributed to shareholders, they contribute to increasing shareholder value in the long run. By reinvesting profits into the business and generating higher returns, companies can potentially boost stock prices and create wealth for shareholders over time.
The decision regarding how much of the net income should be retained and how much should be distributed as dividends is influenced by various factors. A company may choose to retain more earnings during growth phases to fuel expansion, while mature companies with stable cash flows may opt to distribute a higher portion of earnings as dividends to reward shareholders.
At the beginning of the year, ABC Inc. has retained earnings of R500,000. Throughout the year, the company generates a net income of R200,000 from its operations.The company decides to retain a portion of this profit to reinvest in its growth initiatives.
Assuming ABC Inc. does not distribute any dividends during the year:
Retained earnings (End of year) = R500,000 (Beginning of year) + R200,000 (Net income) – R0 (Dividends)
Retained earnings (End of year) = R700,000
So, at the end of the year, ABC Inc. would have retained earnings of R700,000.
Cash sweep refers to the process by which excess funds in a bank account are automatically transferred into another account or investment that offers higher interest rates or better returns.
A cash sweep helps individuals or organisations optimise the use of their cash by ensuring that passive funds are not left sitting in low-interest accounts.
There are several common types of cash sweep arrangements:
By automatically moving cash into higher-yielding accounts or investments, individuals and organisations can maximise their returns on cash balances. Furthermore, cash sweep arrangements can help manage risk by diversifying investments or reducing exposure to counterparty risk.
Suppose a corporation maintains R100,000 in its operating account, where it earns minimal interest. By establishing a cash sweep agreement, the bank automatically transfers any funds exceeding a predefined threshold, say R50,000, into a high-yield investment. Instead of earning minimal interest in the operating account, the excess R50,000 generates higher returns in the investment, enhancing the company’s overall cash management strategy while retaining R50,000 as a buffer for daily operational expenses.
An angel syndicate is a group of individual angel investors who pool their resources and expertise to collectively invest in early-stage startups.Â
Angel syndicates enable individual angel investors to combine their financial resources, allowing them to make larger investments than they would be able to alone. By pooling funds, syndicates can provide startups with greater access to capital, which is crucial for early-stage growth and development.
Participating in an angel syndicate allows individual investors to diversify their investment portfolios across multiple startups. This helps spread risk and mitigate the potential for losses, as investments in early-stage companies are more risky.
Angel syndicates conduct thorough due diligence on potential investment opportunities, evaluating factors such as market potential, competitive landscape, team capabilities, and growth prospects. Syndicate members collaborate to identify promising startups and assess their viability before making investment decisions.
Angel syndicates aim to generate returns for their members through successful exits, such as acquisitions or initial public offerings (IPOs) of portfolio companies. Syndicate members typically share in the profits generated from successful exits, providing a financial incentive for participating in the syndicate.
A group of experienced angel investors forms an angel syndicate focused on investing in early-stage software-as-a-service (SaaS) companies.
They identify a promising SaaS startup developing a productivity tool for remote teams, and collectively invests R500,000 in exchange for a 15% equity stake in the company.
The syndicate members leverage their expertise and networks to support the startup, and over the next few years, the startup experiences rapid growth. Eventually, the company attracts the attention of a larger tech firm, leading to a successful acquisition that generates significant returns for the syndicate members.
Through their collaboration in the angel syndicate, individual investors were able to access investment opportunities they may not have found independently, diversify their portfolios, and contribute to the success of a promising startup.
UK
IRE
AU
CA
US
ZA
yet? Register here!