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Importance of finance on financial decision making

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Added on  2020-01-23

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Managing ABC Financial Resources and Decisions INTRODUCTION 3 TASK 13 1.1 Identification of various sources of finance3 1.2 Implications of the different source of finance4 1.3 Evaluation of different financial source 4 TASK 25 2.1 Cost of different sources of finance 5 2.2 Importance of financial planning 5 2.3 Information required for making decisions6 2.4 Impact of finance on finical statement6 TASK 37 3.1 Impact of finance on the financial statement7 3.2 Calculation of unit cost and prising decisions on the basis of given information 8 3.3

Importance of finance on financial decision making

   Added on 2020-01-23

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Managing Financial Resources andDecisions
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Table of ContentsINTRODUCTION.....................................................................................................................................3TASK 1....................................................................................................................................................31.1 Identification of various sources of finance.....................................................................................31.2 Implications of the different source of finance...........................................................................41.3 Evaluation of different financial source......................................................................................4TASK 2....................................................................................................................................................52.1 Cost of different sources of finance............................................................................................52.2 Importance of financial planning................................................................................................52.3 Information required for making decisions................................................................................62.4 Impact of finance on finical statement.......................................................................................6TASK 3....................................................................................................................................................73.1 Impact of finance on the financial statement.............................................................................73.2 Calculation of unit cost and prising decisions on the basis of given information........................83.3 Assess viability of project............................................................................................................8TASK 4..................................................................................................................................................114.1 Major financial statement ........................................................................................................114.2 Comparison between financial statement and types of business organization .......................114.3 Interpretation of financial statement using appropriate tools .................................................12CONCLUSION.......................................................................................................................................12REFERENCES.........................................................................................................................................13
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INTRODUCTIONIt is essential for a business organization is to manage their financial resources whichcan help to provide long term success. They required that to arrange all financial capital inorder to running a business in the long run. There are various internal and external financialresources which can be used by the small enterprises. The management of finance is one ofthe competitive task every business unit(Arthur, Cheng, and Czernkowski2010,). it need thebrief knowledge of financial tools which can help to make financial decision making in aneffective manner. There are various aspects in the financial management and decision makingsuch as acquisition of funds, cost of finance, risk associated with the business and otherfactors which needs to be analyses carefully and effective manner so that they can attain theirlong term goals and objectives. TASK 11.1 Identification of various sources of financeStart a new business is one of the complex task for every entrepreneurs needs to raise fundwhich can help to running the business at the initial stage. There are various sources whichcan be used by the company sources in an appropriate manner. Developing a food storerequired a lot of capital and the main aim of their business is to provide high quality food andcustomers which can help to meet their long term goals and objectives(Bennouna, Meredithand Marchant 2010). In the context of small food store the owner of the company having £20000 which is notenough. Therefore, they focusing on the acquisition more funds approx. £300000 formaffordable sources. There are various ways in order to raise funds which is given below:Internal sourcesVenture investors: This is the part of internal sources of finance where the investor or groupof investor invest their capital to the small business enterprises but as a return they want toshare in their business. This is one of the best way which can be used by the cited businessorganization in order to raise funds in an appropriate manner. The cost of capital is low butthe business has to compromises in their business and market share. External sources
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Bank loan: This another source of fund which is related with the external funding. There arevarious financial institutions which can provide capital to these business in terms of loan. Thecost of capital of such source is too high( Bodie 2013)1.2 Implications of the different source of financeThere are different sources of finance which stated above and using use by ABC foodLimited which can help to manage their fund or financial resources finance in an effectivemanner and make their decisions which can help to meet its future targets. Venture investors: This is one of the most usable form of capital in the United Kingdomwhich can be used by the small and medium enterprises in order to manage their business inan effective manner. It having a large impact on the business and its future growth anddevelopment. The cited business organization is required that analyses such sources it prosand cons which can help to make their financial decisions effective. In these sources offinance, it can be divided in to following parts:Ordinary shares: These are equity shares which are held by the family members andmanagement. The small portion can be entitled for the venture capital. It can be good optionfor the cited business unit where they can hold maximum portion of the share within theirhand(Bradbury2011). Bank loan: This is a type of debt which provided to the start-ups in order to running business.as early discussed the cost of capital is to high which can increase the cost of operation andreducing the profitability. But now a day the government of UK is provide loan to newbusiness ventures to start their business at the lower interest rate. It can help to increase theirprofit which is the common goal for each and every business unit. 1.3 Evaluation of different financial sourceIt is the responsibility of the manager of the company is to use their financial resources at theoptimum level which can help to increase revenue for the company. It can also lead to attractlarge number of investors which increase the investment and provide consistent growth totheir business. The finance manager is required to prepare their income statement andfinancial statement such as balance sheet of ABC food LTD can make their decision moreaccurate and use market opportunities in an effective manner. In the context of availablesource of finance such as external and internal investors evaluate risk which are associated
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