Analysis of Cash Budget and its Use in the Pricing Decision | Study
Added on 2020-02-17
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MANAGING FINANCIAL RESOURCES AND DECISIONS1
Table of contentsIntroduction......................................................................................................................................3Task 1: LO1 (1.1, 1.2 and 1.3).........................................................................................................3Task 2: LO2 (2.1, 2.2, 2.3 and 2.4)..................................................................................................5Task 3: LO3 (3.1, 3.2 and 3.3).........................................................................................................9Task 4: LO4 (4.1, 4.2 and 4.3).......................................................................................................14Conclusion.....................................................................................................................................17Reference list.................................................................................................................................182
IntroductionManaging financial resources is completely different from managing physical resources.Financial resources are those resources that can be measured or valued in monetary terms orhaving monetary denominations. Financial resources give rise in both gains and losses dependingupon the management techniques. The main aim of the study is to evaluate the techniques ofmanaging the financial resources and decision-making by properly analyzing the given taskswith respect to the financial resources (Greene et al. 2015). It has been decided to explore theconcept of sources of finance available to the business and how the business can avail or utilizein accordance with their need. It has also been decided to understand the financials decisionmade by the business entity and investors by using the financial information related to thebusiness available to them. Moreover, the study focuses on the analysis of cash budget and itsuse in the pricing decision. The use of investment appraisal technique is also applied tounderstand the viability of the project undertaken by the company. Finally, the financialstatement of the company is analyzed and compared with the previous year’s performance byusing appropriate accounting ratios.Task 1: LO1 (1.1, 1.2 and 1.3)Task 1.1Identifying the sources of finance available to both unincorporated and incorporatedbusinessSources of finance refer to the availability of the sources from where any business entity,irrespective of their size and nature can raise funds for the different business purposes. Sourcesof finance are available to both unincorporated business as well as incorporated businessSources of finance available to unincorporated businessThe unincorporated business includes family trust, partnership and sole proprietorship becausethey do not posses any separate legal entity from its owner. The sources of finance available tothis kind of business include personal savings, small business loan and small business line ofcredit for partnership business (Corsatea et al. 2014). Sources of finance like angel investors,private investors, business grants and bank loans are available to sole proprietorship.Sources of finance available to incorporated business3
Incorporated business include any kind of corporate body or company whether may be privatelimited or public limited. They possess the separate legal entity from their owner. The sources offinance available to this kind of business include both internal and external sources. Stock andother assets held for sale, retained profit, working capital, bank borrowings, equity funding andbonds or securities are some of the sources of finance available to the incorporated publiccompanies. However, incorporated private companies can raise funds from the similar sourcesbut not from shares or securities, because only listed public companies are entitled to raise fundsfrom shares publicly (Lee et al. 2015). In addition, raising funds from the subsidiary companiesor taking the loan from subsidiaries are considered as the internal source of finance and bothpublic and private companies have right to raise funds from this source if the company has anysubsidiary. Apart from this, both the companies can borrow money from other companies otherthan subsidiaries, which will be called as the external source of finance.Task 1.2Evaluating the internal and external sources of finance and their sources of financeA business need both short term finance and long-term finance to cover their daily expenses andto grow or expand the business respectively. Short-term finance provides the business withworking capital and long-term sources of equity funding. Assessment of implication for usinginternal and external sources of finance varies from companies to companies based on their need.Evaluating the internal source of finance and its implicationsThe internal source of finance can be utilized in different ways and for different purposes by thebusiness entity. Personal savings can be used according to the wish of the owner of the business.Especially small business utilizes the personal savings more. Retained profit can be utilized forobtaining or purchasing or repairing machinery, It system and vehicles. A business entity canalso utilize this source of finance for marketing and advertising purpose (Fraser et al. 2015).Working capital can be utilized to meet daily expenses like rent, salaries, stationery, bills andother invoice payments because working capital provides short-term money to the business.Funds raised from selling the assets can be utilized to develop or grow new areas of business likethe purchase of property can be made by selling old property.Evaluating the external source of finance and its implicationsAn external source of finance can be utilized in different ways and for different purposes by thebusiness entity. Shares are issued to raise funds from the public by the limited companies in4
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