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Cost of Different Sources of Finance

   

Added on  2020-02-03

22 Pages5100 Words54 Views
MANAGING FINANCIALRESOURCES ANDDECISION

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Sources of finance.................................................................................................................31.2 Implications of different sources...........................................................................................41.3 Appropriate sources finance for business project.................................................................4TASK 2............................................................................................................................................52.1 Cost of different sources of finance......................................................................................52.2 Significance of financial planning........................................................................................52.3 Information required for decision making system................................................................6TASK 3............................................................................................................................................63.1 Impact of finance on financial statements.............................................................................63.2 Budget and making appropriate decisions............................................................................83.3 Calculation of unit costs and price determination process....................................................9TASK 4..........................................................................................................................................124.1 Financial statements............................................................................................................124.2 Comparison of different formats of financial statements....................................................134.3 Financial statements using ratio analysis components........................................................13CONCLUSION..............................................................................................................................17REFERENCE.................................................................................................................................18INTRODUCTION...........................................................................................................................1

INTRODUCTIONFinancial sources are managed through using different tools as analysing actual businessperformance and preparing strategies for profitability at high level. In this regard, different ideasare created for balancing between incurred expenses and gained revenue. The present report isbased on understanding different financial sources and outcomes for enhancing profit earningcapacity of Morrison entity. It is grocery and food items provider of UK that is planning toimprove its quality services effectively. In addition to this, various financial statements which areanalysed for presenting economic structure of entity is to be described. Moreover, cost ofdifferent sources of finance for funding can be expressed through this assignment. Along withthis, several information systems for decision making system are to be presented. Apart fromthis, significance of financial planning including budget for decision making system can beidentified. Hence, students are able to understand different financial sources for effectivemanagement of business organization through this report.TASK 11.1 Sources of financeMorrison entity can allocate fund from different sources such as taking loan fromfinancial institution, retained earning, getting use of personal savings and so on. By analysingfinancial statements as income statement, balance sheet, profit and loss account, varieties ofideas are generated for economic stability and improving monetary profile of organization. Someof the main sources can be expressed as follows:-Taking financial aid from family members and friends: - It is great source of finance forenlargement of entity as well creating innovations in quality services (Abanis and et.al.,2013). Therefore, using personal saving and reserve cash at entity is best tool forimplementing financial decision making process. Venture capitalist:- Morrison entity can allocate fund from venture capitalist by whicheffective amount can be gained through this process. Moreover, for financial sourcing,various tools and techniques for management of entire business activities can be achievedat high level. Taking loan from bank:- For improving performance of entity by creating innovations inquality services of Morrison can be done through taking loan from financial institution

like bank. However, adequate and required high level of fund can allocate through thissource efficiently.Thus, collecting fund from mentioned internal and external sources are effective for enhancingefficiencies of Morrison as well making decisions for further operations. In addition to this, forgetting source of finance from different ways is effective for effective profitability andincreasing efficiencies of entity at high level. Moreover, internal and external source of financeare valuable for enhancing profitability as well creating innovations for further businessoperations effectively. Hence, effectiveness of organization can be achieved through gettingsource of finance from different tools (Berman, 2015).1.2 Implications of different sourcesFinancial sourcesFinancialimplicationsLegal implicationsDilution of controlPersonal savingLack of fund can occurfor future operationsNo legal implicationUsing personal savingremains risky forbusiness operations infuture time in case ofrequirement.Retained earningUsing reserved fund oforganisation is riskyfor further operations.Less formalitiesSame as for personalsavingVenture capitalistHigh interest rates forrefund affects futureprofitability and futurebusiness operations.It has some legalimplications foroperating businessactivities.Monetary position ofentity impacts forfuture operations.Loan from bankSame as for venturecapitalist.Lots of legalformalities.Same as for venturecapitalist.

1.3 Appropriate sources finance for business projectServices provided by Morrison can be improved through choosing appropriate financialsource for creating innovations. For this purpose, high level of fund can be gained throughgranting loan from financial institution. However, funding through venture capital is useful forimproving quality services of organisation effectively (Bodnar and et.al., 2013). In accordance tothis, selecting best source for getting financial source is great tool for making decision inprospective of future operations. However, it can be accomplished through using effectivefinancial sources. In this process, high level of amount can arrange for expansion of entity andenhancing its quality services through venture capitalist and granting loan from bank. Thus,banks and retained earning are best tool for financial management as well improving itsefficiencies. Therefore, by taking advantage of loan from bank is suitable to allocate adequatefund for project accomplishment effectively.TASK 22.1 Cost of different sources of financeAbove mentioned financial sources are adequate for improving services of Morrisonentity. For this purpose, it is required to analyse all cost incurred on all operations. For using personal saving and retained earning, it is essential to analyse all fcatorsincluding performance of entity in future time. It is determined that Morrison has not soadequate fund to use for business operations therefore reserved least fund should besecured.For granting loan from bank, it is essential to identify interest charged on fund as well inregards to venture capitalist, refund amount and all cost incurred for operations aredetermined. Including this, cost of different sources of finance including dividend,interest rates, commission and all factors are required to be analysed.For getting source from retained earning, it is required to consider future saving andconsiderations for further operations. However, all factors regarding cost of finance areessential to be analysed that affects further operations and implementations.Thus, as per evaluation, it is recognized that Morrison can get source through loan from bankand venture capitalist as financial aid from other business entities. Hence, adequate and highlevel of fund can allocate through these sources that influence profitability and further operationsregarding improving quality services of entity.

2.2 Significance of financial planningManager of finance department prepares plan on the basis of analysing actual businessperformance. It is important to achieve effectiveness of Morrison as well improving its qualityservices at high level. Through financial planning, systematic steps are presented to be followedon that affects on further business operations. In addition to this, financial planning is createdincluding forecasting and decision making to operate business activities (Buckland and et.al.,2016). It is helpful for increasing business and competitive strategies at large scale. In thisprocess, significance of financial planning can be described as below:-Useful for effectiveness of organizationIncreases profit earning capacities as well competitive advantage.Useful for adequate production and distribution systemValuable for making decisions regarding further business operations.Crucial to implement financial position and improving economic structureTherefore, through financial planning procedure, several ideas are created for decisionmaking and enhancing efficiencies of Morrison plc. In addition to this, financial planningprocedure is helpful to present systematic business operations as well creating innovations forexpansion of business entity. However, financial planning is considered as basis for makingdecisions related to transaction of goods and enhancing its efficiencies at large scale. 2.3 Information required for decision making systemFor decision making regarding improving performance of Morrison through enhancing itsquality services, different information are required. Therefore, information related to financialand non-economic position of entity. Through this process, potential of organisation for profitearning and further operations are identified. Information related to entity's production and distribution of goods are gained that areinterlinked with further operations. However, various operations are recognized includingprofitability, liquidity and efficiency of firm therefore implementations in future time canbe obtained effectively.

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