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Sample ON Managing Financial Resources and Decision Making

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Sample ON Managing Financial Resources and Decision Making

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  1. A Sample On Managing Financial Resources and Decision Making By

  2. TABLE OF CONTENTS INTRODCUTION ...........................................................................................................................3 TASK 1 ............................................................................................................................................3 LO 1.1 Identify the sources of finance available to a business. ..................................................3 LO 1.2Assess the implications of the different sources. .............................................................4 Lo 1.3 Evaluate appropriate sources of finance for a business project. ......................................4 TASK 2 ............................................................................................................................................5 LO 2.1Analyse the cost of different sources of finance. ...........................................................5 LO 2.2 Explain the importance of financial planning. ................................................................5 LO 2.3 Assess the information needs of different decision makers. ...........................................6 LO 2.4Explain the impact of finance on the financial statements. .............................................6 TASK 3 ............................................................................................................................................7 LO 3.1 Analyse budgets and make appropriate decisions. .......................................................7 LO 3.2 Explain the calculation of unit costs and make pricing decisions using relevant information. .................................................................................................................................8 LO 3.3 Assess the viability of a project using investment appraisal techniques. .....................10 TASK 4 ..........................................................................................................................................11 LO 4.1 Discuss the main financial statements . ........................................................................11 LO 4.2 Compare appropriate formats of financial statements for different types of business. 12 LO 4.3 Interpret financial statements using appropriate ratios and comparisons,both internal and external. ..............................................................................................................................13 CONCLUSION ..............................................................................................................................14 REFERENCES ..............................................................................................................................15

  3. INTRODUCTION One of the main aspects for operations of a business organization is that of arranging and managing finances (Damodaran, 2012). The reason why it is so important for a company can better be understood through fact that if a firm does not have access to proper and adequate finances, then there are very less chances for the organization to survive. This report has been prepared so as to identify the various sources of finances that a company can take use of; and also evaluate their efficiency and effectiveness for the corporation along with their implications of the company. LO 1.1 Identify the sources of finance available to a business. Recession is such a concept which has a great negative impact on operations of an organization (Nikbakht and et. al, 2006). This was what happened in the company that I used to work in. I got laid off by the management, and now after consulting family and friends, the plan is to start a new business firm of my own. But to do so I would have to arrange finances, for which there are numerous sources which can be considered and utilized. Some of them are as follows: Bank Loan: It is one of the most common sources of finances that I can consider for the purpose of starting a new business. Today not only are the loans easily available to people, but also that they can be availed at a reasonable interest rate (Vance, 2002). They can be of either short term or long term depending upon my preference and need. Personal Savings: This is another source of arranging finances that I can consider while setting up my business. At present I have a savings of £50,000. While establishing the business, this source of finance can prove to be of great use and help (Hansen, Mowen and Guan, 2009). As per the case scenario, a new business is going to be opened by a business owner, hence, he will require the finance at least of Euro 10000- 1 million. There are internal and external sources that can be used by a new business holder. Internal sources Toll Free No. +44 203 3555 345 Mail Us: help@globalassignmenthelp.com Global Assignment Help provides best Finance assignment help to college and university students at an affordable price.

  4. are personal capital of owner which will be the easier and less costly sources of finance. The business owner can personal saving for the business purpose. On the other hand, external sources are bank loan on which the owner has to pay interest. To purchase the machinery and other assets of business, owner can use hire purchasing as a sources of finance. The other business purpose are such for expansion and product development, in with the existing firms can just retained earning as a internal sources of finance. SAMPLE ON Managing Financial Resources and Decision Making FOR ASSIGNMENT HELP KINDLY CONTACT AT: HELP@GLOBALASSIGNMENTHELP.COM LO 1.2 Assess the implications of the different sources. It is a well known fact that to start a new business, there are a lot many sources through which finances can be arranged (Murphy, 2013). But different sources have different implications and impact. They have been discussed as follows: Bank Loans: Though getting bank loans relatively is a simple and easy task, but the person who avails them have to go through a lot, because of fact that they have to pay interest rates along with monthly installments (Correia and et.al, 2012). Also the bank loans are characterized as not flexible, because of reason that the banks do not offer any kind of flexibility to the individuals. Additionally such rates also keep on fluctuating from time to time. Toll Free No. +44 203 3555 345 Mail Us: help@globalassignmenthelp.com Global Assignment Help provides best Finance assignment help to college and university students at an affordable price.

  5. Personal Savings: It is also a very useful source through which finance for the business can be arranged (Tauringana and Clarke, 2000). This method entails that I would have to invest the savings of £50,000 into the business. Though it will help in reducing the amount as well as interest for loan (if any) that I take for the same purpose. But this would mean that I will lose all the savings which I posses and at the time of need, I might not have enough money for personal needs. Lo 1.3 Evaluate appropriate sources of finance for a business project. It is a well known fact that there are a lot many sources for the purpose of arranging money to start the new business. In this regard it may not be wrong to say that such sources can be selected only when their thorough evaluation and assessment has been done (Anderson and Coleman, 2000). In respect with the present scenario, new business is going to be opened by a business owner, hence, will require the finance at least of Euro 10000- 1 million. This business project is sis suggested to use bank loan and personal capital as a sources of finance. Personal capitol of owner is the appropriate sources of finance which is available with owner and he has not to pay any cost for such. On the other hand, Bank loans are very effective and useful sources through which required money for starting the business can be arranged (Gibson, 2012). Though they are very easily available to the individuals, but there are some complications involved at the time of paying them back. Major issues that I would have to face is that of high interest rates and their continuous fluctuations. But arranging money through it would mean that I would be able to save the personal savings and different assets that I possess. Operations of banks in this regard are very strict, as they do not tend to provide any kind of flexibility to individuals (Prior, 2004). Herein, through the above evaluation it can be said that to start up the new business I should look at options of loan from banks and investing some amount from savings. This means that I can use some amount from the personal savings, and take loan for rest of the amount. Toll Free No. +44 203 3555 345 Mail Us: help@globalassignmenthelp.com Global Assignment Help provides best Finance assignment help to college and university students at an affordable price.

  6. LO 2.1 Analyse the cost of different sources of finance. Though there are numerous sources from which finances can be acquired which are easy to be availed, but they have their own down sides as well (Gloy and LaDue, 2003). By taking a loan from the bank, although I would get access to large sums of money, but a major portion of the earnings from that business would go into paying the installments and interests charged on loan amount. Also there are numerous legal formalities which have to be completed so as to make sure that the loan is approved and the business can be set up. Apart from this, if personal savings are invested in the business, there are chances that there would be no money left with me at the time of need. Such a situation can prove to be very precarious and bad for the business as well as individual (Friedlob and Schleifer, 2003). LO 2.2 Explain the importance of financial planning. For business organizations it is very much imperative that its management engages into activities related to financial planning. This part is so important for companies because of reason that it enables authorities in the firm to make plans through which they can manage their financial resources and the money available to them in an effective way (The financial plan, 2013). Financial Planning basically is related to arranging, confining and defining monetary goals of the company. Through such an outlook towards monetary aspect of business operations, it can be ensured that the firm would be able to maintain or even look to improve its financial position in the market. SAMPLE ON Managing Financial Resources and Decision Making FOR ASSIGNMENT HELP KINDLY CONTACT AT: HELP@GLOBALASSIGNMENTHELP.COM Toll Free No. +44 203 3555 345 Mail Us: help@globalassignmenthelp.com Global Assignment Help provides best Finance assignment help to college and university students at an affordable price.

  7. Importance and necessity of Financial Planning Financial planning is helpful in managing funds as well as making effective use of it. The importance of financial planning is to forecast the need to finance for the possible operation and to use effective sources to raise funds Budgeting is the most important tool of financial planning that enables company to identify future income and expenses so that funds can be managed. It would help the management in ensuring ability to manage financial sources and money matters in such a manner that when the need for finances arises, they would be having enough money with them (Dayananda, 2002). This is important for taking major activities such as expansion, merger and acquisition  It also has an important role to play in processes related to making the right investments and deliver valuable returns as well as results to the company. It would also assist the management in determining the real value of assets that the company possesses. LO 2.3 Assess the information needs of different decision makers. Information is such an aspect of business operations which is very critical to success of the company. In this regard it may not be wrong to say that by gaining access to different kinds of information and data, the management and decision makers can make accurate and effective decisions (Weygandt and et. Al, 2009). There are various stakeholder of business who require financial information for the purpose of decision making. These stakeholders and their purpose is as follows: Toll Free No. +44 203 3555 345 Mail Us: help@globalassignmenthelp.com Global Assignment Help provides best Finance assignment help to college and university students at an affordable price.

  8. Stakeholders: Stakeholders need to have access to a variety of information related to the organization, as through it they can base their decisions on. The information include return on equity and divided provided to stakeholder. It supports their decision to invest funds in business. Employees: They are the spine of workplace, as a lot of matters are dependent on them. The employees requires the information in respect with the profitability of organization (Sevic, 2008). Fund Providers : Fund providers are external stakeholders of business who require information regarding creditworthiness of business. Most of the financial institutes are interested in knowing the creditworthiness of company so they can provide credit to such parties. This information can raised from balance sheet. Investors : The investors are decision maker who require information and their decision making of investing funds is supported by the profitability information of business as they want to invest funds which is earning good profits. They need to have information such as financial performance of the company; profits earned interest that they must get, etc. Government : Government is interested in the information related to tax payment and financial statement are the major sources to known if company is meeting tax obligations at time or not. SAMPLE ON Managing Financial Resources and Decision Making FOR ASSIGNMENT HELP KINDLY CONTACT AT: HELP@GLOBALASSIGNMENTHELP.COM Toll Free No. +44 203 3555 345 Mail Us: help@globalassignmenthelp.com Global Assignment Help provides best Finance assignment help to college and university students at an affordable price.

  9. LO 2.4 Explain the impact of finance on the financial statements. Raising finance through several sources will affect the financial statements. Bank loan will increase the liabilities as well as the assets in the balance sheet of the firm. Interest charged on the loan amount will be placed in the profit & loss account (Sawady and Tescher, 2008). The interest paid against the bank loan will deduct the profits of company and would directly impact the net profits. The company has to pay interest to bank that will be known as expenses, hence, will be shown in debit side. It will also affect the cash flow from operating activities and the amount of case will be deducted under operating activities. Finance arranged from selling of assets will increase the capital amount in the liabilities side. Further funds arising from engaging group of investors will have impact on liabilities and asset side of the balance sheet. Profits and losses arising will be charged in the income statement. Money coming from the personal savings will increase the amount of capital in the balance sheet and there will no such negative impact on financial statements. Along with this, it will have the impact on the cash flow from the investing activities. LO 4.1 Discuss the main financial statements . For a business organization, financial statements are of great use and importance, because of reason that they present monetary position of the company in market (Nikbakht and et. al, 2006). It discusses about financial transactions and events that take place during performance of the organization. Primarily there are three types of financial statements: Statement of Comprehensive Income: It shows earning per share of the company and discusses about various events (business in nature) about the firm. It also displays the revenues and expenses incurred during operations of various activities. The element Toll Free No. +44 203 3555 345 Mail Us: help@globalassignmenthelp.com Global Assignment Help provides best Finance assignment help to college and university students at an affordable price.

  10. included in income statement are : expenses, income, net profit net loss as so on. The information of net profit and net loss of business can be identified from such statement, Statement of Cash Flow: It describes about the net cash inflow and outflow during course of the business. The case flow statement provides the information regarding operating m investing and financing activities. The net case available with business for a particulate time span can be identified from this statement. Additionally, it also provides information related to whether funds have increased or decreased. Statement of Financial Position: It is also known as the Balance Sheet. It lists all liabilities and assets which are owned by an organization. Key elements of valancesheet are : Assets, Liabilities and Owner’s equity. This statement represents the actual position of the company in market or industry, as it provides information about various assets (including tangible and intangible) and liabilities of the organization for a specific time period. LO 4.2 Compare appropriate formats of financial statements for different types of business. Every form of business uses different formats for constructing the financial statements. In business like sole proprietorship, the owners usually do not prepare all the financial accounts because they just have to show the profit & loss statement. This is because they are the only owner and they can control the business alone (Gloy and LaDue, 2003). Sole traders : Individual who operates business, do not follow guidelines of preparing financial statements. They only prepare profit and loss statement to assess the expenses incurred by business for a period of time. However, sole traders prepare cash flow to identify the inflows and outflows. Partnership Business : Statements related to the profits and income of the partners are prepared which will contribute towards the capital. Further partner's capital account of each partner will also be constructed individually. The amount of profit and loss will be divided in their agreed ratio (Dayananda, 2002). Toll Free No. +44 203 3555 345 Mail Us: help@globalassignmenthelp.com Global Assignment Help provides best Finance assignment help to college and university students at an affordable price.

  11. Limited companies : It is essential for the public and private limited companies to prepare all the documents on the basis of IFRS (International Financial Reporting Standard) and GAAP ((Generally Accepted Accounting Principles). These two regulators offers the ethical proof of trading done by the organizations. Income statement for a service rendering firm is different from the retailing & producing firms. Businesses which are of small size may have very simple balance sheet showing only the major assets and liabilities (Murphy, 2013). Large size firms will maintain large size balance sheet depicting all the assets & liabilities. SAMPLE ON Managing Financial Resources and Decision Making FOR ASSIGNMENT HELP KINDLY CONTACT AT: HELP@GLOBALASSIGNMENTHELP.COM Profitability In terms of return on Shareholders’ funds, Morrison is much better and impressive than that of Sainsbury. Reason behind it is that there has been an increase in the return on funds of shareholders for Morrison. However, gross margin of Morrison and Sainsbury is decreased that repress significant decrease in profitability. Liquidity : Current ratio represents the ability of firm to pay the short term obligations. It has been witnessed that the the current ratio fort Morrison Supermarket is improved as compared to last year but as a slow rate of Sainsbury Plc. For both the organizations, it shows good and Toll Free No. +44 203 3555 345 Mail Us: help@globalassignmenthelp.com Global Assignment Help provides best Finance assignment help to college and university students at an affordable price.

  12. interesting results, meaning that both of them have the capability to pay off their short term obligations. The liquidity performance of company are good as they are able to pay short term obligation in cash. CONCLUSION From the above study, it can be concluded that finance is one of the most important aspects of business operations as it was seen in the case of Easy Electronics, where firm’s expenses had increased considerably due to improper financial planning. Net Present Value is very important and can provide management with important information related to present value of money in the market. Furthermore, sole ownership businesses are not required to prepare proper finical statements, rather they just have to show the profit and loss account. But public and private companies have to make sure that they follow both national and international accounting standards as well as principles. SAMPLE ON Managing Financial Resources and Decision Making FOR ASSIGNMENT HELP KINDLY CONTACT AT: HELP@GLOBALASSIGNMENTHELP.COM https://www.globalassignmenthelp.com Toll Free No. +44 203 3555 345 Mail Us: help@globalassignmenthelp.com Global Assignment Help provides best Finance assignment help to college and university students at an affordable price.

  13. REFERENCES Books & Journals Anderson, L. and Coleman, M., 2000. Managing Finance and Resources in Education. SAGE. Correia, C. and et.all., 2012. Financial Management. 6th ed. Juta and Company Ltd. Damodaran, A., 2012. Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, University Edition. John Wiley & Sons. Dayananda, D., 2002. Capital Budgeting: Financial Appraisal of Investment Projects. Cambridge University Press. Friedlob, T. G. and Schleifer, F. L. L., 2003. Essentials of Financial Analysis. JohnWiley & Sons. Gibson, G., 2012. Financial Reporting and Analysis. 13th ed. Cengage Learning. Gloy, A. B. and LaDue, L. E., 2003. Financial management practices and farm profitability. Agricultural Finance Review. 63(2). pp.157 – 174. The financial plan, 2013. [Online]. Available through: <http://www.agualtiplano.net/the- financial-plan.php>. [Accessed on 25th June 2014]. SAMPLE ON Managing Financial Resources and Decision Making FOR ASSIGNMENT HELP KINDLY CONTACT AT: HELP@GLOBALASSIGNMENTHELP.COM https://www.globalassignmenthelp.com Toll Free No. +44 203 3555 345 Mail Us: help@globalassignmenthelp.com Global Assignment Help provides best Finance assignment help to college and university students at an affordable price.

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