Manage Financial Resources: Principles, Communication, Compliance, Cost of Capital, Finance and Investment Decision

BSBFIM801 Manage financial resources

Contents
INTRODUCTION.....................................................................................................................................4
ASSESSMENT 1........................................................................................................................................4
ASSESSMENT 2......................................................................................................................................13
ASSESSMENT 3......................................................................................................................................18
ASSESSMENT 4......................................................................................................................................39
ASSESSMENT 5......................................................................................................................................45
ASSESSMENT 6......................................................................................................................................47
APPENDIX 1............................................................................................................................................51
APPENDIX 2............................................................................................................................................51
APPENDIX 3............................................................................................................................................52

INTRODUCTION
Financial resources are a term in which consist of all the financial funds of a business
entity. These resources are essential part of business that help to conduct all the operational
activities in effective manner (Rodriguez-Fernandez, 2016). Various kinds of funding are utilized
by an entity such as, cash in the bank, venture capital and assets of company can convert cash
easily. These resources are required to manage in business in proper manner in which consist of
money they want to invest to start new venture. An essential source of income is the public
investment because people can purchase shares and presents an effective term of enhancing
capital. This report based on the managing financial resources of different organizations. In this
report consist of various assessment that based on the different financial activities.
ASSESSMENT 1
QUESTION 1 Explain the principles of:
Accounting- The term accounting can be known as a process of recording all financial
transactions in a systematic manner. The aim of accounting to get useful information during
preparation of financial statements. There are some principles of accounting which are as
follows:
 Accrual principle- This is the principle which states that financial records must be
documented when they take place in the financial period, instead of in the cycles when
capital expenditures are correlated with each other. This really is the basis of accounting's
accrual basis. Instead of being arbitrarily put on hold or sped up by the related cash flows,
it is crucial for the development of cash receipts and payments what truly occurred in an
accounting cycle.
 Conservatism principle- This is the principle in which companies can report costs and
obligations as rapidly as feasible, but only if they are confident they will exist, to record
sales and assets (Keehn, 2016). This gives the financial results a cautious slant that could
produce lower reported earnings, as sales and acknowledgment of assets could be
postponed for some time. Conversely, this theory appears to facilitate early, rather than
later, the recording of losses. This description may be pushed too far, where an

organsiation routinely misrepresents its consequences to be less than is actually the
situation.
 Cost principle- This is the principle that a corporation should report its cash, liabilities,
and equity contributions only at their initial cost of acquisition. When a host of
accounting principles are going the way of changing revenues and expenses to their equal
values, this concept is becoming less true.
Principles of Financial statements: Financial statements are formal reports of a
company, individual, or other entity's financial transactions and role. Specific financial data is
delivered in a standardized and simple way. Below some key principles are mentioned in such
manner:
 Income statement: As per the principle there should be calculation of gross and net gains
and losses on the basis of accounting rules and accept, for a given duration, that the rise
(or decrease) of total income over that time is profit margin (or loss).
 Balance sheet- As per the principle there should be recognize that statements of asset and
responsibility balances on a defined date are non-current assets (fixed assets), capital
resources, total revenues, interest expense (creditors: sums due within 12 months),
lengthy obligations (borrowers: amounts due for more than one year), capital
expenditures, hired capital and owned capital are recognized and described.
Rules to prepare financial statements for different entities:
Sole trader-
 Explain the distinction between a trading firm and a service company planning income
reports.
 Allow allowances for accumulated and prepaid costs and changes for poor loans and
provisions for uncertain obligations for accrued and prepaid profits.
 Making changes to products bought for us by the holder.
Limited liability companies:
 Understand the value of the word restrictive liability.

 Prepare clear horizontally or vertically allocation accounts to grasp and differentiate
between approved, called-up, paid-up share capital.
 Recognize and discern between share capital and loan resources (preferred stock and
common equity).
Principle of cash flow: The cash flow statement outlines the impact of a company's
running, spending and borrowing operations on cash mostly during accounting cycle. It reflects
on previous business decisions on topics including the issuing of shares or the selling of lengthy
securities. This detail is only accessible from the other financial reports in bits and pieces. While
cash flows are essential to the financial stability of a business, the cash flow statement
executives, analysts, lenders, and other stakeholders with critical data. Below principles of cash
flow statement are mentioned in such manner:
The cash flow statement assumes an action structure which is broken into three sections:
activities of business, acquisition and funding. Operating events are generally listed first,
followed by acquisition activities and, ultimately, funding activities. The cash flow theory
implies that the cumulative cash flows arising from that are only net income applicable to the
value of a project (Usman and Vanhaverbeke, 2017). The concept of discounted cash flow (DCF)
is built on the presumption that the value of a portfolio is approximately equal to the current
value of its potential expected cash flows. By either the direct method or the indirect method,
the operational component of the statement of cash flows can be seen. The investing and
supporting areas are the same for each method; the only distinction is in the operational portion.

The key types of gross sales invoices and gross cash transfers are illustrated by the direct
process. In the other hand, the indirect approach continues with net profits and changes the
results of the sales on profit/loss. Cash flows from the operational segment will eventually
deliver the same outcome, whether underneath a direct or indirect approach, but the
representation will vary.
QUESTION 2: Briefly describe best-practice communication processes and methods.
The only way people can do amazing challenges is by a linked team and a linked
enterprise in modern environment. With the sharing of thoughts and knowledge, interactions and
relationships are created. In building these relations and interaction between individuals,
communication serves as a powerful method. A very important talent and craft is collaboration.
It is essential to have the correct purpose to communicate with the other person, no care what
way of communicating we use. Below some methods of communication are explained:
 Written communication: This applies to handwritten or registered papers, such as
schedules, agreements, memos, meeting notes, paper review of specifications, risk
registers for design documentation and other associated written materials. It is used to
have well-thought-out and also well information, so it is easier to check than verbal
contact because it is not possible to change anything written instantly.
 Oral communication: It requires the sharing of information or signals through orally
using phrases through face-to-face or mobile interactions (Shah, Sahai and Mishra, 2017).
It is the most popular mode of conversation, since it paves the way for suggestions right
after the message has been sent. It is understood that it is also random. The capacity to
listen and consider deeply before communicating is important in verbal contact.
 Nonverbal communication: Without the use of language, non-verbal contact is
transmitting information. It is mostly via the language of one's body, movements, eye-
contacts, posture, pitch and sound of one's speech, etc. One can express immense
thoughts and emotions.
 Visual communication: A image is a thousand words worth a picture. Written
correspondence is significantly enhanced by visual aids including such animation,
graphics, animation, graphs & maps, painting, signs and badges. In order to make

knowledge sharing more accessible and successful, visual contact is often used in the
correct mix.
So these are methods of communication which are best in practice and need to be applied
in the context of companies for better outcome.
QUESTION 3: Briefly describe compliance requirements, including relevant legislative
responsibilities.
Compliance usually involves agreeing with a regulation, such as a definition, procedure, norm or
statute. Regulatory enforcement defines the aim that companies strive to accomplish in their
attempts to ensure that they are mindful of the applicable rules, legislation, and legislation and
take action to conform with them (Eniola and Entebang, 2016). Due to the growing number of
laws and the need for organsiational accountability, the use of standardized and harmonized sets
of compliance controls is gradually being embraced by organizations. This strategy is used to
insure which, without any of the needless duplication of initiative and operation from capital, all
relevant governance criteria can be fulfilled. Regulatory enforcement varies not only by sector
but also by venue. The financial, science, and medicinal regulatory frameworks in one nation, for
example, could be identical but with significantly unique nuances in an another nation. This
similarities and variations are also the result of actions in different nations, markets and policy
environments to shifting priorities and specifications.
QUESTION 4: Explain the cost of-
Cost of capital: Capital expense is the interest earned needed to make an investment
appraisal initiative worthwhile, like constructing a new plant. Usually, as owners and statisticians
analyze the cost of capital, they mean the weighted average of the debt and equity costs of a
business combined together. The cost of the capital calculation is used collectively by businesses
to assess if the expense of resources is worthwhile a capital venture and by shareholders who use
it to evaluate if an expenditure is worth taking the risk as opposed to the gain. Capital costs
depend on the method of funding used. It applies to the equity cost if the corporation is funded
solely by assets, or to the debt expense if it is creating the actual by debt. Cost of capital, from
the viewpoint of a shareholder, is the return required by whoever is supplying the wealth for a
company. In other terms, it is an estimation of the vulnerability of a corporation. In doing so, to

decide if a certain inventory is too risky but would create a decent investment, a shareholder can
look at the variability (beta) of the financial performance of a firm. The capital cost of a business
is usually estimated using the capital method's cost model that includes the cost of both debt and
equity financing. In necessary to come at a consolidated rate, each segment of the company’s
capital structure is weighted correspondingly, and the calculation includes any type of debt
financing on the profit and loss account, except stockholders, shares, and other types of debt.
Cost of capital structure: The structure of capital of business is way of financing overall
growth and operations with the help of different funding sources. The composition of capital
applies to the amount of debt and/or equity that a business uses to support its activities and fund
its resources (Picken, 2017). The financial structure of a company is usually expressed as a
percentage of debt-to-equity or debt-to-capital. Debt and capital ratio are used to support the
purchases, capital costs, investments, and other assets of a firm. When they determine which to
use leverage or equity to fund projects, there are compromises businesses have to make, and
management can combine the two to find the optimal cash position. A firm's optimum financial
performance is also described as the debt and equity which resulted in the company's lowest
value of the firm cost (WACC). In fact, this technical definition is not often utilized, because
companies also have a tactical or conceptual interpretation of what will be the optimal
framework. A company may issue either more debt and equity in order to optimize the
framework. As a method of recapitalization, the additional money that is acquired can be used to
invest in new investments or can be used to buy back debt/equity that is already unpaid.
Cost of working capital: The cost of working capital is related to those expense which
are related to managing day to day operations and activities for a company. These expenses are
considered on the basis of two distinct factors: firm’s short term expenses and current portion of
lengthy term debts which is usually the part of debt during the upcoming time period. All types
of expenses are can be identified on company’s balance sheet in current liability part. In the
current liabilities portion of their balance sheets, many businesses have at least two categories of
accounts: accrued liabilities and payroll payable. In addition, the particular items categorized as
current liabilities differ across industries and sectors and they're more focused on which day-to-
day operations are essential to the organsiation. In the industrial sector, for instance, the expenses
involved with the transformation of raw materials to finished goods are also defined as WCC.