Managing of Financial Resources Assignment

MANAGEMENT OF FINANCIAL RESOURCES
STUDENT NAME:
STUDENT ID:
PROFESSOR NAME:
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Table of Contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
1.1 Identification of the sources of finance to the incorporated and the unincorporated business.3
1.2 Assessing the implications of the sources of finance................................................................7
1.3 Identify the most suitable source of finance for the company Clariton Antiques Limited......11
Task 2.............................................................................................................................................11
2.1 Analysing the costs of the two sources of finance considering the factors of Tax, Dividends
and Interest.....................................................................................................................................11
2.2 Explaining the benefits of financial planning for the entity Clariton Antiques Limited.........12
2.3 Explain the financial impact on the firm if the takeover is financed by the Partners, Finance
Broker and the Venture Capitalists................................................................................................12
2.4 Explaining the impact of financial statement if the project is financed by the Venture
Capitalists and the Finance Broker................................................................................................13
Task 3.1 Preparing and analysing the cash budget for Clariton Antiques....................................13
Task 3.2 Select an appropriate costing method for the organisation Claritin Antiques Limited and
also draft a suitable pricing model for the entity...........................................................................14
Task 3.3 Based on the capital budgeting techniques make a selection between the projects based
on the given data............................................................................................................................15
Task 4.............................................................................................................................................16
4.1 Describe the components of financial statements....................................................................16
4.2 Comparison of the financial statements of Clariton Antiques Limited with the financial
statements of a sole proprietary concern and a partnership firm...................................................17
4.3 Facilitate a comparison of the financial statements of the company in the current year with
that of the previous year................................................................................................................18
Conclusion.....................................................................................................................................19
Reference List:...............................................................................................................................20
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Introduction
This assignment focuses on the importance of finance in the business. In this assignment, the
sources of finance have also been briefly described. Apart from this, it has been also shown in
this assignment how the business organisations use the various sources of finance for enhancing
their business level. The benefits of financial planning and the impact of financial sources have
also been critically analysed in this assignment. Apart from this, the key components of the
statement of the financial year have also been evaluated in order to provide a clear idea about the
necessity of financial statement.
Task 1
1.1 Identification of the sources of finance to the incorporated and the
unincorporated business.
The availability of the finance varies according to the form of the business entities. The available
sources of finance can be explained by taking into consideration two types of entities: These are
generally:
● Unincorporated Entities
● Incorporated entities.
Unincorporated Entities: Those entities which are not registered under any of the corporate law
in any of the existing territories of the globe can be referred to as the Unincorporated Entities
(Lay and Johnson, 2015, p.209).
Some of the unincorporated business can be discussed as under:
1. Sole Proprietary Firm: The sole proprietary firm is one of the oldest forms of business in the
globe and is the most simple and the common form of business in the world. The sole proprietor
is solely responsible for the activities of the business and therefore he is also called as the
entrepreneur of the business (Singh et al. 2014, p.16). This type of business is suitable for the
small outlets, shops, garment shops, and to the outlets where services like hairdressing,
beautician, photographers and the gardeners are made available.
In the commencing of a proprietary firm, the entrepreneur himself funds the business. Some of
the available sources of finance to this form of business can be classified as follows:
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1. Owner’s Fund: The owner’s fund is one of the most important sources of finance in the
sole proprietary business. Here the owner of the business himself provides capital to the
business for the purpose of commencement (Vanderveen et al. 2013, p.4).
2. Loan From Relative: The sole trader firm can also acquire funds from the relative of the
sole proprietor. This also helps the firm to raise the loan capital.
3. Bank Loan: The sole proprietor can also raise loans from the bank both long-term and the
short term. He can raise loan funds from the bank against the security of the assets.
4. Cash Credit Loan: Cash Credit Loan is available to the business of the sole proprietor in
order to meet the working capital requirement. Many banks offer cash credit loan to the
sole proprietary firms based on the position of the working capital.
2. Partnership Firms: Partnership Firms refers to that category of the firms which are formed
with the constitution of two or more people forwarding capital to the business for the purpose of
earning profits. All the profits earned by the business are shared among the partners of the
business and the partners of the firm are severally and jointly liable for the acts of the acts of the
firm and the action of each partner is binding upon the other partners of the firm irrespective of
the fact that whether the partner is an active partner or a non-acting partner (Caiazza and Stanton,
2016, p.208). The partnership form of business is mainly applicable to the firms offering the
services of accounting, services of auditors, doctors, solicitors, legal services and many of the
professional services. Many of the big business entities are also registered as a partnership firm.
Some of the sources of the fund that are available to a partnership firm can be discussed as
under:
● Partner’s Capital: The partnership firm can invite capital investment into the firm from its
related partners and the business can thereby be funded by the introduction of the
partner’s capital. More is the number of partners more is the amount of capital available
for commencement of the business.
● Loan from the relative of the partners: The partnership firm can invite the loan funds
from the relative of its partners. The partner’s relative can fund loan to the business
which can help the business in case of the emergencies.
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