Project Report on Capital Budgeting
Added on 2020-01-23
14 Pages3164 Words112 Views
MANAGING FINANCIALRESOURCES AND DECISIONS
Table of ContentsINTRODUCTION...........................................................................................................................................3TASK 1..........................................................................................................................................................31.1 Identify sources of finance.................................................................................................................31.2 Assess the implications of sources of finance....................................................................................31.3 Evaluate the sources of finance..........................................................................................................4TASK 2..........................................................................................................................................................42.1 Analyze the cost of sources of finance...............................................................................................42.2 Explain the importance of financial planning....................................................................................52.3 Assess the information needs of various decision makers.................................................................52.4 Impact of finance on financial statements..........................................................................................5TASK 3..........................................................................................................................................................63.1 Prepare cash budget and analyze it....................................................................................................63.2 Calculate per unit cost and analyze pricing decisions........................................................................73.3 Assess the viability of the projects.....................................................................................................8TASK 4........................................................................................................................................................114.1 Discuss different financial statements..............................................................................................114.2 Compare different financial statements used by partnership or sole trader owner...........................124.3 Interpretation of ratios.....................................................................................................................12CONCLUSION.............................................................................................................................................14REFERENCES..............................................................................................................................................16
INTRODUCTIONFinance act like a lifeline of the business which improves the existing health of thebusiness. Clariton Antique has been selected for this project report in order to assess thecapabilities. This report is all about different source of finance, its implications on the business.Capital budgeting tools and ratio analysis has used.TASK 11.1 Unincorporated business- It is that kind of business which is not registered under the law or another kind of company law. There is no legal existence of the business entity in the external market and doesn’t enjoyed any kind of rights and duties (Sharma and Keller, 2017). Sole trader is common example of the unincorporated business who organizes their business on their own foot without any financial or legal support offered by the government.Retained earnings- This is used by the owner as this source of finance is the remaining amount after deducting dividends to the available shareholders out of total amount of profit earned by an enterprise. The own property of an individual are invested in the business of clariton in order to earn higher profit.Selling of assets- This is regarded as commonly used technique in which an entity will uses theiridle or obsolete assets by selling them in order to earn revenue. The earned revenue by the ownerwill in turn utilize by them in their business to earn sales and the revenue in exchange of the amount applied in the business.Incorporated business- This is registered business who enjoy all kinds of benefits and rights of having legal identity in the external business world.Debentures- This is debt obligation choose by an entity owner in order to stabilize their overall capital structure as this is cheapest source of finance. The interest will be paid by clariton to all the debenture holders for lending specific amount of money.Equity financing- The capital will be raised by an individual after inviting wide number of public to apply for the shares. Shares are issued by an entity owner in order to meet their business requirements.1.2 Internal sources of financeRetained earnings- The current source of finance utilized by an entity which is useful for the business in meeting their expenses. This amount arises when dividends are payable from the available profit earned by the business. There is no repayment of cost as the business using their
source of finance y boosting their investment spirit. It enhances the capability of an enterprise and its overall economic growth.Selling of assets- The existing assets held idle in the business will be sold off in order to generate higher amount of sales and the revenue in the business enterprise. Basic risk incurred in this source that assets some time sold at lower market value of all the assets utilized in the business.External source Debentures- Taking debt by an enterprise in order to fund their business as this is regarded as cheapest source of finance. Interest paid on the amount taken by the business in order to fund their business will reduce the profit of an entity.Equity financing- The Clariton will stores capital in their business for long time till the wound up of the business entity. The dividend paid to all the shareholders is basic burden created on the business of clariton. The cost of issuing equity shares is additional expenses incurred in the venture.1.3 The best suitable sources of fiancé are based on pros and cons of all the sources of finance taken into consideration by an entity which is given as below:Internal sources- The retained earnings are used as finance for an entity as enterprise uses their property without any kind of obligation of using it in their business. On the other hand, selling ofassets is suitable in case of existing owner and not for an entrepreneur.External source- Debt and equity source of finance is regarded as external source in which applications for money are invited by the business from the external market in order to form theiroverall capital structure. TASK 22.1 BasisVenture capitalFinance brokerDividendWe finance Ltd the venture capitalist wants to take over the clariton business by providing capital in exchange of 20% stake in their business as an appreciation for grantingloan. No dividend involvedInterestNo interest chargedBrokers provided bank loan tothe business on the behalf of
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