Managing Financial Resources for Specialty Fine Food and Drink Contract

ASSIGNMENT
TOP308 - UNIT 2 MANAGING FINANCIAL RESOURCES
STUDENT NAME:
STUDENT ID:
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Table of Contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
LO 1: Sources of financing accessible for a business......................................................................3
AC 1.1 Identification of the financing sources accessible by a business........................................3
AC 1.2 Assessment of the implications or the inferences of the identified financing sources........4
AC 1.3 Evaluation of the suitable financial sources for the business project..................................5
LO 2: Recognition of finance as an important resource for the business project............................6
AC 2.1 Analysis of the costs of the financial sources identified.....................................................6
AC 2.2 Explanation on the significance of financial planning and details of financial planning
assumed............................................................................................................................................6
AC 2.3 Identification and assessment of the information requirement by the internal and external
decision takers.................................................................................................................................7
AC 2.4 Justification of the impact of finance on the financial statements......................................7
LO 3: Deriving financial decisions from the identified financial information................................9
AC 3.1 Analysis of project cash and budgets for appropriate decision making..............................9
AC 3.2 Calculation of unit costs and determination of pricing decisions based on relevant
information....................................................................................................................................10
AC 3.3 Assessment of the viability of the contract through various investment appraisal methods
and necessary recommendations....................................................................................................11
Task 2.............................................................................................................................................12
LO 4: Evaluation of the financial performance of J Sainsbury Plc...............................................12
AC 4.1 Discussion of the significant financial statements............................................................12
AC 4.2 Description and comparison of the financial statements with respect to different types of
businesses......................................................................................................................................13
Conclusion.....................................................................................................................................15
Reference list.................................................................................................................................16
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Introduction
Management of the financial resources has been one of the most significant tasks over the ages
for entities for undertaking business activities successfully. The government of the United
Kingdom has put forward an arena of opportunities for the small business firms to work on the
contracts of the central government in the country. For the purpose of the given assignment, a
contract on ‘Specialty Fine Food and Drink’ has been chosen from the contract finder
(Contractsfinder.service.gov.uk. 2017). Further, analysis of the financial sources and
implications and costs involved in accessing the chosen financial sources have been presented in
the assignment in order to assess the overall impact on the financial statements. Financial
budgets and investments appraisal techniques are implemented to assess the viability of the
chosen contract. In the last section, an analysis of the financial statements of J Sainsbury Plc has
been presented to evaluate the financial performance of the company.
Task 1
LO 1: Sources of financing accessible for a business
AC 1.1 Identification of the financing sources accessible by a business
In order to undertake the contract of ‘Specialty Fine Food and Drink’ in the UK, it is important
to identify and assess the availability of the financial resources for the business. Initial
investment will of £ 200000. Therefore, the bid will not exceed £ 300000 for the chosen contract.
With respect to the financing context, the entrepreneur has £ 20000 to invest in the business. For
the purpose of the entrepreneurship business the different financial sources available are internal
and external sources of finance.
Internal Sources
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The internal sources of finance have been identified as retained earnings, saleable value of the
assets and working capital for the business. First, the retained earnings are identified as an
available source of finance for the business as it is the profit used in the business after
distributing the dividend to the shareholders or the providing a return to the owners. Second,
another important internal source of financing for the business is the ‘sale of assets’. The
proceeds from the ‘sale of assets’ are usually used for funding the capital requirements of the
business (Armstrong et al. 2010). Third, reduction in the working capital requirement by the
adjusting the account payables or account receivables ensures reduction in working capital
obligation and therefore, the funds meant for working capital can be employed for other
financing obligations.
External Sources
The external sources of finance available to a business are owners’ contribution, bank overdrafts,
trade creditors and long term loans. Owners’ contribution has been identified as the money
invested by the owner or the shareholders’ in order to commence and continue the business.
‘Bank overdraft’ is a source of funding provided by the banks in order to fund the short term
obligations of a business (Beyer et al. 2010). The persons that provide business materials on
credit basis have been identified as trade creditors and are a source of external business funding.
In addition, long term loans provided by the banks or the financial institutions are a source of
external funding requiring the business to payback the principal amount with interest on
maturity.
AC 1.2 Assessment of the implications or the inferences of the identified
financing sources
Implications of the internal sources
The internal sources of finance have multiple insinuations in the form of advantages and
limitations. The benefits of accessing the internal sources of finance are immediate availability of
capital, absence of interest payments at regular intervals and controlling procedures with respect
to creditworthiness of the business. Other benefits are, third party influence is not present giving
the owners more flexibility and freedom to pursue the business (Brigham and Ehrhardt, 2013).
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