MANAGING FINANCIAL RESOURCES Introduction 4 Task 14
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Added on 2020-01-16
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MANAGING FINANCIAL RESOURCES Introduction 4 TASK 14 1.1 Identify the sources of finance available to a business 4 1.2 Assess the implications of the different sources 4 1.3 Evaluate appropriate sources of finance for a business project 4 Task 25 2.1 Analyse the costs of different sources of finance5 2.2 Explain the importance of financial planning 5 2.3 Assess the information needs of different decision makers5 2.4 Explain the impact of finance on the financial statements6 TASK 37 3.1 Analyse budgets 7 3.2 Explain calculation of
MANAGING FINANCIAL RESOURCES Introduction 4 Task 14
Added on 2020-01-16
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Table of ContentsIntroduction..........................................................................................................................................4TASK 1.................................................................................................................................................41.1 Identify the sources of finance available to a business...............................................................41.2 Assess the implications of the different sources.........................................................................41.3 Evaluate appropriate sources of finance for a business project..................................................4Task 2....................................................................................................................................................52.1 Analyse the costs of different sources of finance.......................................................................52.2 Explain the importance of financial planning.............................................................................52.3 Assess the information needs of different decision makers........................................................52.4 Explain the impact of finance on the financial statements.........................................................6TASK 3.................................................................................................................................................73.1 Analyse budgets..........................................................................................................................73.2 Explain calculation of cost per unit and pricing decisions.........................................................93.3 Assess the viability of the projects............................................................................................11TASK 4...............................................................................................................................................134.1 Discuss financial statements.....................................................................................................134.2 Compare financial statements format.......................................................................................144.3 Interpretation of ratios..............................................................................................................14Conclusion..........................................................................................................................................15References..........................................................................................................................................16INTRODUCTIONFinance is that vehicle which transports an entity from initial destination towards the final 2
destination of sucess.This project is all about selecting sources of finance which is assessed on two parameters like positive and negative aspects. Costs of all the sources of finance will be determined in order to help an individual in using all the resources for the sake of the firm. This report stresses on cash budgets and calculation of unit selling price. Capital budgeting techniques is used along with the ratio analysis techniques in analysing the performance of an enterprise in relation to its external market.TASK 11.1 Identify the sources of finance available to a businessRetained earnings- It is regarded as internal source of finance used by an entity owner inaccomplishing their financial goals and the objectives (Jorgensen and Rotter, 2016). The retainedearnings is arises when an individual pays off dividend from the available profit earned by an entity.This kind of capital invested by an entity in their business will carry fewer obligations as the ownerhas full right over the amount to be saved or used as investment.Bank loan- Every business sector small scale or large scale can take loan from external party frombanks or financial institutions. Perquisite for taking loan is the collateral security needs to bedeposited with banks to get loan for whatever amount required by an entity. Loan interest will begiven monthly by the business as a fixed cost to the banks. Agreements and stationery charges willbe incurred by an entity in taking loans which will reduces overall profitability of the businessentity as additional expenditure incurred in the business in order to attain all the objectives.1.2 Assess the implications of the different sourcesBasisRetained earningsBank loanLegalThere is no legal provision attracted while using this sourceLegal agreement will be createdamong both the partyControlFull control enjoyed by the ownerBank have control over collateral security of businessFinancialCapital increasesDebt increasesOpportunity costsEquity sharesDebenture1.3 Evaluate appropriate sources of finance for a business projectRetained earnings-It is best suitable for an entity has they enjoy full control over the amountutilised by them in the business. Potential of business will increases as savings will be broken inorder to generate higher returnBank loan- An entity can raise any amount of loan from the banks to complete the businessrequirements. Interest on loan is restriction of this source of fiancé which created burden on thebusiness in order to repay.3
TASK 22.1 Analyse the costs of different sources of financeRetained earnings- An entity will not incur any kind of cost in using this kind of source of financeas this is the final surplus generated by the firm (Hosain, 2016). The amount of dividend paid to allthe shareholders will reduces the amount of retained earnings along with paying of taxes.Bank loan- Cost involved in taking this source of fiancé will also count as costs charged in takingbank loan such as legal fees. Collateral security need to be given along with the interest on loanwhich is fixed cost to be given by an entity owner.2.2 Explain the importance of financial planningFinancial planning is that stream which enhance the existing capabilities of an entity asusing this approach existing resources are used in unique manner in order to improve their futureconditions. Financial planners will assess the existing finance hold by an entity in order to cater theneeds and the expectations of its future clients. Importance of financial planningIt induces the financial resources used by an entity in upgrading their overall businessExpenditures are reduces in order to increase available income to be restored by an entity forthe future purpose.Future plans are prepared by taking into consideration current expenditures by comparing itwith all the past expenses.Future finance can be arranged which n turn induces the chances for survival of the firm in thefuture.2.3 Assess the information needs of different decision makersFinancial information can be accessed by various users of the business using financialstatements prepared by an entity such as income statements, balance sheets and cash flow circulatedto all of them in form annual reports of an enterprise (Parker and Swanson, 2016). There is severalinformation seekers whose needs will be fulfilled by accessing financial reports is given as below:Employees- Good performance of the business is essential for all the personnel as they get highersalary and incentives that ensures their survival for long time in the business.Owner- Efficiency maintained by the firm is essential in order to know the potential areas where aowner can expand its existing business.Creditors- higher financial performance reflects ability of an entity in order to repay the amounttaken by the business to all the creditors.Investors- Higher base of capital is sufficient for an entity in order to attract wide number of4
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