Financial Decision Making and Budgeting

This assignment delves into the importance of financial considerations in business decision-making, particularly focusing on project management. It emphasizes the role of budgets in guiding actions and mitigating financial risks. Key concepts discussed include cost analysis, payback period, variance analysis, and the use of ratios like gross profit ratio and current ratio to assess a company's financial health. The example provided analyzes Tesco's financial performance based on these ratios.

Business Resources

INTRODUCTION
Human resource is the one of the most important department of any organization because
it directly measures the performance of the employees in an organization. In the current report
varied recruitment documents that are used in the current organization are discussed in detail.
Along with this, major communication and employability skills that are needed in respect to the
specific job role are discussed in detail. Along with this, major physical and technological
resources that are needed for operation of an organization are discussed in detail. At end of the
report, different sources of internal and external sources of finance are discussed briefly. In this
way entire research work is carried out by the researcher.
P1- Describe the recruitment documentation used in a selected organization
As part of recruitment documentation there are some documents that are prepared by the
HR manager of the Tesco. One of them are job description and specification document. An
important element in workforce planning is to have clear job descriptions and person
specifications (Berman, 2012). A job description sets out:
 the title of the job
 to whom the job holder is responsible
 for whom the job holder is responsible
 a simple description of roles and responsibilities
Job descriptions and person specifications provide the basis for job advertisements. They help
job applicants and post-holders to know what is expected of them. At Tesco these documents are
combined. As they are sent to anyone applying for jobs, they should:
 contain enough information to attract suitable people
 act as a checking device to make sure that applicants with the right skills are chosen for
interview
 set the targets and standards for job performance (Ma, Ding and Hong, 2010).
 Job descriptions and person specifications show how a job-holder fits into the Tesco
business. They help Tesco to recruit the right people. They also provide a benchmark for
each job in terms of responsibilities and skills. These help managers to assess if staff are
carrying out jobs to the appropriate standards.
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P2- Describe the main employability, personal and communication skills required when applying
for a specific job role
While applying for any job there are multiple personal and communication skills that are
needed. This is because it is the skills that ensured that an individual can perform a job in better
manner (Hair, 2015). Employability and personal communication skills that are required for
specific job role are explained below. Writing skills: On the administrative jobs writing skills are needed because in the
administration paper or electronic work is done and under this one need to prepare letters
and many other documents. It is the writing skills that ensured that one will be able to
communicate anything in better manner to the front person.
 Verbal communication skills: An individual must have good communication verbal
skills. This is because when one have good communication skills then it means that same
person it using concise and clear sentence in the communication process. It can be said
that these are the communication and personal skills that one must have when applying
for job.
P3- Describe the main physical and technological resources required in the operation of a
selected organization
Technological resources used by the firm in its business are as follows. E bay enterprise: eBay Enterprise enables brands and retailers of all sizes to deliver
consistent omni channel experiences across all retail touch points to attract and engage
new customers, convert browsers into loyal buyers, and deliver products with speed and
accuracy. Happen: Happen is a global innovation agency that enables ambitious brands in the
highly crowded and competitive FMCG, Retail and OTC markets to grow your business
through innovation (Page, 2014). Mentioned software is used at large scale by retailers. SQL: SQL Server Express is free database software that works great with any web
application framework such as PHP, and your favorite applications such as Wordpress,
and Drupal. Free SQL server comes with reporting options and other expansions you're
simply not going to find anywhere else. It's everything you're looking for in a database.
 Tableau: Tableau Software is a software company headquartered in Seattle, Washington,
United States which produces interactive data visualization products focused on business
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intelligence (Wood, Coe and Wrigley, 2016). Tableau has a mapping functionality, and is
able to plot latitude and longitude coordinates. It has been criticized for being overly US-
centric. They also offer custom geocoding ,as well as five ways to access their products:
Desktop (both professional and personal editions), Server, Online (which scales to
support thousands of users), Reader, and Public, with the last two free to use. Vizable, a
consumer data visualization mobile app, was released in 2015. It can be said that there is
huge importance of the mentioned software for the business firms.
P4- Describe sources of internal and external finance for a selected business Equity: Equity shares are a common source of finance for big companies. Not all the
businesses can use this source as it is governed by a lot of legislations. A key feature of
equity share is the ‘sharing of ownership rights’ and therefore, the current shareholders’
rights are diluted to some extent. It is considered costly compared to debt finance because
the return in the form of a dividend or bonus shares offered to shareholders is not tax
deductible. Also, it’s not easy to raise this capital as it requires a lot of legal formalities to
be complied with and above all, the investors should have faith in the company. Debentures: Debentures are another common means of finance used by companies who
prefer debt over the equity. Debt is considered to be the cheaper mode of finance
compared to equity. It does not share control with investors. It is because the interest paid
to debenture holders is tax deductible. Rest of process of debentures issue is similar to
equity issue. It is offered to the common public and therefore necessary legislations need
to be complied with (Koen, Bertels and Elsum, 2011). Debentures also involve some
cost of issuing and they are collateralized by some assets of the company. Term Loan: The characteristics of a term loan is very similar to debentures except that it
does not include too much cost of issuing because it is given by some bank or financial
institutions. The common public is not involved in it. A rigorous analysis of company’s
financials and future plans is done by the bank to judge the debt servicing capacity of the
company. These loans are also secured by some assets. Preferred Stock: The preferred stock shares characteristics of both common equity stocks
and debt. They are called preferred because they have got priority over common equity
shares in terms of payment of dividend and the capital also at the time of liquidation. A
special kind of preferred shares called cumulative preference shares has its dividend
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accumulated till it is not paid (Reeves and Deimler, 2011). The payment of such dividend
can be delayed but cannot be ignored.
Venture Capital: It is same as equity shares except that the investors are a different set of people.
Commonly known as venture capitalists, they normally invest in a new company at an initial
stage and do a rigorous analysis of a company before investing. Venture capitalists exit the
firm once it starts getting a good valuation.
 Retained earnings: Retained earnings are the another source of finance that is used by
the firms to fund their internal business operations. It is basically the portion of profit that
remains after meeting all expenses from the revenue.
P5- Interpret the contents of a trading and profit and loss account and balance sheet for a selected
company
In the Tesco income statement it can be observed that there are multiple items like sales
revenue and cost. It can be observed that sales revenue is reducing consistently in the business
from the last few years. Expenses are also not in control and same are increasing regularly
whether same are direct or indirect expenses. This reflects those firms have less control on its
expenses and due to this reason its performance is poor. In the balance sheet it can be observed
that there are number of items like assets and liability. Assets are divided into current assets and
long terms assets. On other hand, liability is divided into long and short term liability. Balance
sheet of the firm is reflecting that financial condition of the business firm is not good and it need
to make more efforts in order to improve its financial condition (Ma, Ding. and Hong, 2010). In
this regard proper cash management and cost control strategy can be formulated by the firm in its
business.
P6- Illustrate the use of budgets as a means of exercising financial control of a selected company
Budget is the one of the most important mean that is used to control expenses in the business. By
developing budgets, business managers set income and expenditure targets to be achieved. The
business manager can constantly compare actual financial outcomes with targets in the budget
and take corrective action if the targets in the budget are not being met. Business managers need
to continually review the budget and use it as a guide when making financial decisions. If a
proposed course of action has been anticipated in the budget, then managers will feel confident
in making a decision to go ahead. But if a proposed course of action has not been costed in the
budget, then managers will appreciate that going ahead will entail financial risk. Determining the
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cost of a project is one of the most important initial steps for a project manager. If a project
manager cannot stay within a controlled budget, they may not have the funds to complete the
project. The budget and financial plan is typically created during the initial stage of project
development (Budget and finance control, 2017). Costs and resources should be set during the
initiation stage to adequately plan and allocate costs. Some tools that project managers can use to
control finances and budget include payback period and other financial forecasting calculations,
and budgeting techniques, including variance analysis. These tools are critically important for
project managers who need to control resources to ensure project completion. If resources are
mismanaged, the project will be characterized by sunk costs.
P7- Illustrate the financial state of given business
Table 1 Ratio analysis
Tesco
Gross profit -2112
Net sales 62284
Gross profit ratio -3%
Current assets 14828
Current liability 19714
Current ratio 0.75
Sales 62284
Creditor 4545
Creditor turnover
ratio 13.70
Interpretation
On the basis of results it can be said that gross profit ratio of the firm reduced by 3%. On
other hand, its current ratio is only 0.75 which means that for every one unit of current liability
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firm have 0.75 units of current assets. Creditor turnover ratio is 13.70 and it means that 13 times
in a year firm by taking goods on credit make purchase. It can be said that firm must try to
reduce creditor turnover ratio and must try to control direct expenses because by doing so
profitability in the business can be improved.
CONCLUSION
On the basis of above discussion it is concluded that in an organization any source of
finance must be selected prudently after considering number of factors. There are number of
factors that must be considered while selecting any sources of finance. By doing so it can be
ensured that better return can be earned on the invested amount. Budget as a statement must be
used time to time in order to make decisions and to make efficient use of resources in the
business. It can be said that by using budget efficient use of resources can be made by the firm in
the business.
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