Financial Tools and Techniques - Report
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Added on 2020-01-23
Financial Tools and Techniques - Report
Added on 2020-01-23
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Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Sources of finance for incorporate and unincorporated business..........................................31.2 Implications of the sources of finance...................................................................................41.3 Identifying the suitable source of finance for business.........................................................5TASK 2............................................................................................................................................62.1 Assessing cost of different source of finance........................................................................62.2 Importance of financial planning...........................................................................................72.3 Information needed by different stakeholders foe decision making......................................72.4 Impact of selected sources of financial statements................................................................7TASK 3............................................................................................................................................83.1 Cash budget and decision making for further improvements................................................83.2 Unit cost and pricing decision in the context of Clariton Antiques Ltd..............................103.3 Assessing the viability of proposed investment...................................................................10TASK 4..........................................................................................................................................134.1 Presenting the key elements of financial statements ‘.........................................................134.2 Comparing the formats of final account presented by Clariton Ltd and sole trader............154.3 Interpreting financial statements by doing ratio analysis....................................................17CONCLUSION..............................................................................................................................19REFERENCES..............................................................................................................................20
INTRODUCTIONIn the present era, growth and success of the firm is highly influences from the decisiontaken by manager in relation to the financial aspects. Now, quick changes take place in thebusiness environment and market trend. In this, manager of the firm is required to take decisionwhich directly aid in the growth and success of it. Moreover, finance is one of the essentialelements that business unit requires to execute business plan within the suitable times frame. Inthis, report is based on Clariton Ltd which offers antique products to UK people. By consideringthe existing growth level business unit has taken decision in relation to expansion of area. Inthis, report will describe the ways through which company can meet its monetary requirements.Besides this, report will develop understanding about the financial tools and techniques which inturn help in making profitable business decisions. TASK 11.1 Sources of finance for incorporate and unincorporated business Incorporated business:Venture Capitalists: Business entities of public and private firm can raise fund throughthe means of venture capitalists source. Moreover, now with the aim to generate highreturn venture capitalists firm lays emphasis on investing money in the growing business.Thus, Clariton Ltd can raise fund by taking assistance from venture capitalists. Bank loan: Company can also meet its monetary needs and requirements by taking loanfrom financial institution. Moreover, banking institutions prefer to give loan to theventure whose business idea or plan is sound. Long term lease: Leasing is the most effective source which enables firm to fulfillfinancial needs and requirements ion the best possible way (Caglayan and Demir, 2014).On the basis of this aspect, by taking fixed assets on lease company can meet monetaryneeds. Unincorporated business
Sales of assets: Sole traders and partnership firm can enhance money by selling fixedassets which are not used by them in productive activities and functions. European grant: To enhance employment opportunity within the country now EuropeanUnion offers monetary support to the business units or entrepreneurs (Dalal-Clayton andSadler, 2014). Hence, sole traders can convert their innovative ideas into reality by takingfund from UK government. 1.2 Implications of the sources of finance Sources offinanceFinancialLegalDilution ofcontrolBankruptcyInternal source of finance Sales of assets For attractinglarge number ofpotential buyerbusiness unit hasplacedadvertisement. Transfer ofownership in alegal basis. No No Governmentgrant Interest chargedby governmenton loan amount. In this, companyis required topresent fairpicture ofbusiness idea andposition whileapplying forloan. Less -External sources Bank loan Rate of interestand loanrepaymentamount orperiodicalinstallment For getting loanbusiness unit hasto comply withthe legaldocumentaryprocess oraspects (Fraser,Bhaumik andWright, 2015). Control level offinancialinstitution ismoderate inbusinessactivities. Bank candemand for loanamount on priorbasis at the timeof bankruptcy. Venturecapitalists Such investorsemploy moneywith the aim togenerate highreturn. In this,dividend hasfinancialobligation for theThey act asequity investorsso according tolegal aspectcompany isrequired to giveshareholdingrights to them. Do interferencein the decisionmaking aspectand therebyaffects freedomof businessentity. Last priority ingetting payment.
firm. Leasing Rent on leasedassets havingmonetaryimplications forthe firm. Laws obligedbusiness entity toreturn asset tothe real ownerafter thestipulated timeframe. Lesser control islimited to theasset provided bythem. At the time ofbankruptcy,company isrequired to returnback asset to thereal owner.1.3 Identifying the suitable source of finance for business From several internal and external sources of finance Clariton Ltd should meetmonetary needs by using the following means are: SourceAdvantagesDisadvantagesVenture capitalistsWe FinanceLimitedBy raising fund fromventure capitalists firmClariton Ltd can takebenefits of monetaryand non-monetaryassistance. Moreover,theyprovideinformation to thebusiness unit aboutmarket trend andgrowth etc. In this way,by using suchinformation companycan develop highlycompetent policyframework (Oh, Changand Cheng, 2016). Loss of control is one ofthe main drawbacks ofventure capitalistssource. Bank loanFinancialinstitution Tax exemption ordeduction on interestamount is one the mainbenefits which ClaritonLtd will enjoy bytaking fund fromfinancial institutions. Under bank loan,business unit hasobligation to repay theamount of loan withinterest after the specifictime frame. This in turnimposes financialobligation in front offirm and therebynegatively affectsworking capital position.
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