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Managing Financial Resources and Decisions- (MFRD)

   

Added on  2019-12-18

19 Pages4982 Words145 Views
MFRD

Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Different source of finance....................................................................................................11.2 Assess the implication of using sources of finance...............................................................31.3 Appropriate source of finance...............................................................................................3TASK 2............................................................................................................................................42.1 Cost of two sources of finance..............................................................................................42.2 Financial planning importance for Clariton Antiques...........................................................52.3 Evaluation of business information for business decisions...................................................62.4 Financial statement's impact.................................................................................................6TASK 3 ...........................................................................................................................................7Cash budget.................................................................................................................................73.2 Unit cost and pricing.............................................................................................................83.3 Calculation of NPV...............................................................................................................9TASK 4..........................................................................................................................................114.1 Financial statement's key components................................................................................114.2 Compare the use of formates by Clarition and R.Riggs.....................................................124.3 Ratio analysis......................................................................................................................14

INTRODUCTIONFinance is the most indispensable tool which is required to run a business effectively andefficiently. It assist an institution to grab the upcoming opportunities in the form of growth andexpansion. Availability of funds provides an opportunity to the company to analyse the areas ofinvestment and expansion. However, a firm can efficaciously manage its financial resources withthe help of finance manager. The defined person aids the organization to get a proper direction ofinvestment and use of financial resources. In order to develop deep understanding of financialmanagement, Clariton Antiques is about to consider. The stated firm has maintained its goodreputation by selling quality antique items in London. The organization was formed by the fourpartners and initiated as the unincorporated business. Further, the firm has grown and createdpositive image in the minds of its customers. As result, the partners have decided to acquire abuilding in Birmingham to open another branch. It would require around £0.5 million where themanagement needs to make decision for arranging funds. Present document is prepared with anintention to identify the suitable source of finance available for the stated organization.Additionally, the report will also depict cash budget and financial statements of the adaptedcompany in order to trace the actual position of the firm (Jackson, 2010).TASK 11.1 Different source of financea) Unincorporated business: Unincorporated businesses are the entities which does not haveseparate legal identity from the owner. Majorly, sole proportioner ship and partnership businesscomes under the category of unincorporated businesses. The stated business concern havedifferent sources of funds available for the growth and expansion. Following are explainedbelow. Personal saving-It is the amount collected and saved by the individual from his/herincome. The cited organization can use the amount of personal saving for the businessexpansion. The major advantage of the adapting this sources is that the owner need not topay any interest over the amount.This can be considered as one of the appropriate sourceof finance for the partners (Kaplan and Atkinson, 2015).Retained earning- Retained earnings is the amount which is being kept by the owner forthe revenues generated by the company.1

Working capital-It is a amount that can be used for financing day to day operations of afirm. This amount is a difference of current assets and current liabilities. It used for short-term financing and it also aid the firm to achieve short-term financial needs.Sale of an assets- It is an another internal source of finance in which an organisationgenerate its revenue by sale its assets such as machinery,land and building etc. However,the management of the cited firm can adapt this source by selling the company assets.This will assist the partners to generate the ample of fund for enhancing the businessactivities effectively. b) Incorporated business: Incorporated business are those which are different form soleproprietors and partnerships. These are the organizations having limited liability and theseorganizations sell the product over the product cost. The cited company can use the sourceswhich are going to be discussed beneath.Bank loan: This is one of the most appropriate source of finance where the borrower needs topay a fix amount of interest over the amount borrowed. The amount of loan can be gathered withthe help of different financial institutions. However, the cited organization can take the amountof loan form the public or private bank. It is seen that the management of Clariton Antiques hasalready taken loan so it will not face any issues. Presently, the cited firm wants to purchase newbuilding to open new branch in Birmingham. However, the organization can take loan form anyfinancial institution. Share capital: The stated firm has an option to issue share capital to the general public in orderto gather funds. The shares can be issued to the investors over the fixed rate of interest. As aresult, the stated organization will be able to manage its funds for the enhancement of itsdevelopment opportunities. Besides this, the organization can share the issues to its new andexisting shareholders as well.Debenture: Debenture is a kind of loan which is being adapted by the medium to largeorganizations for the borrowing of funds. These debentures carries a fixed amount of interestagainst the taken amount. A debenture is like a certificate which is an evidence of the amounttaken to the company. It is one of the appropriate source of finance because the debentureholders does not carry rights to vote.2

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