Evaluation of Financial Performance | Assignment
Added on 2020-01-28
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STUDENT NAME:STUDENT ID:ASSIGNMENT ID:ASSIGNMENT TITLE: EVALUATION OF FINANCIALPERFORMACE AND POSITION1
Table of ContentsIntroduction......................................................................................................................................3Task 1...............................................................................................................................................31.1 Identifying the sources of finance available to the business......................................................31.2 Assessing the implications of sources of finance......................................................................31.3 Evaluating most appropriate sources of finance for Clariton Antiques.....................................42.1 Assess and compare the costs of above mentioned sources of finance with reference to.........52.2 Explaining the importance of financial planning.......................................................................52.3 Describing the information needs of different decision makers................................................62.4 Describing the impact on the financial statements with reference to........................................7Task 3...............................................................................................................................................83.1 Analyzing cash budgets for Clariton Antiques and making appropriate decisions...................83.2 Explaining how unit costs are calculated to make pricing decisions (giving examples)...........93.3 Assessing the viability of a projects using investment appraisal techniques whether theoptions satisfy Peter’s criteria for investment...............................................................................10Task 4.............................................................................................................................................144.1 Explaining key components of main financial statements......................................................144.2 Compare appropriate formats of financial statements for different types of business............164.3 Analysing financial statements using appropriate ratios and comparing with previous years16Conclusion.....................................................................................................................................18Reference List................................................................................................................................192
IntroductionClariton Antiques Ltd. is retail store dealing in sales of antiquities. It was started five years agoby its four partners. It was started as an unincorporated business but slowly and steadily hasgrown into reputable business organization. It has two branches in central London and plans toexpand itself by acquiring a building in Birmingham to launch a new store. It requires £0.5m forlaunch and has few loans up its sleeve. The following report draws considerable sources offinance that would help Clariton to finance its new store. Task 11.1 Identifying the sources of finance available to the businessa) Unincorporated businessUnincorporated business owners are responsible for every actions of business and they have tobear all expenses out of the business. These businesses are sole proprietor or partnershipcompanies. They raise finances for their business through both external and internal sources.Internal sources include retained earnings and fixed assets. Retained earnings are profitsgenerated after deducting every dividends and expenses (Roberts, 2015, p.351). Fixed assets aretangible assets in possession of the company for a long time that is usually in the forms of noncash, such as machines and equipments, factories and offices, etc. External sources arecomprised of long term loans, hire buy and leasing and share capitals. b) Incorporated businessIncorporated are companies that have separated entities from their owners and have its ownrights. It consists shareholders and owners are not sole proprietor of companies and businessdecisions are taken by a group of people (Mason et al. 2015, p.55). Its sources of finance includecurrent assets, venture capitals, shareholders and director’s fund, trade creditors, etc. 1.2 Assessing the implications of sources of financea) External sourcesExternal financial sources are sources that company seeks from outside when it do not haveadequate finances from internal sources. External sources can raise big capitals but have fewimplications with it. When taking help of investors or shareholders, companies have to give up3
certain control of the company. Companies need to keep investors happy and share profits withthem which create larger profits in smaller chunks (Carbó‐Valverde et al. 2016, p.140). Venturecapitalists take substantial parts in the ownership of the company. Banks loans or drafts could beover expensive at times and companies are companies have to make timely repays to resist anyactions. b) Internal sourcesInternal sources make up the internal finances used for company needs. It enforces quickdecisions and avoid wait for financial approval. But using it has some disadvantages. Mainconcern for using internal sources is when companies spend their profits or capitals; they are leftwith less money to maintain their daily expenses (Gorodnichenko and Schnitzer, 2013, p.1120).It competes with budgets which are already weak. Benefits of assets sold can no longer accrue tothe business. At time of crisis, companies have no money to sustain themselves or to surfaceabove the crisis. Internal sources require regular standard business performance for a long time. 1.3 Evaluating most appropriate sources of finance for Clariton AntiquesClariton Antiques are need of potential financial sources that can fund its plan to acquire abuilding to launch a new store. It has various options to procure financial assistance from for itsbusiness expansion. Clariton since being an unincorporated institution can finances from bankloans. It has accounted profit since its introduction and enjoys considerable reputation in antiquemarkets. So it can easily get loans from the banks. Bank loans for small capitals would also notgenerate larger interests (Bellavitis et al. 2017, p.138). It has also the options of hire buy orleasing which would enable Clariton to lease their assets for a certain period and raise capitals.This would enable them to use their equipments and own them after contracts ends. Procuringcapitals from prospective venture capitalists would also be feasible option as it will allow themto take suggestions from them, already having experiences in investing in other companies andearning higher profits. This would prevent Clariton from using up their internal finances and gainprofitable partners with only parting with limited shares. Stock trading or getting shareholdersare also potential sources that would generate sums whatever they anticipate or require. 4
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