Managing Financial Resources and Decisions Assignment

MFRD

Table of Contents
INTRODUCTION................................................................................................................................3
TASK 1.................................................................................................................................................3
1.1 Available sources of finances.....................................................................................................3
1.2 Implication of the sources..........................................................................................................4
1.3 Evaluation of most appropriate sources.....................................................................................4
TASK 2.................................................................................................................................................5
2.1 Analysing cost............................................................................................................................5
2.2 Importance of financial planning...............................................................................................5
2.3 Assessing information of stakeholders......................................................................................6
2.4 Impact of the sources of finance................................................................................................6
TASK 3.................................................................................................................................................7
3.1 Analysing budget and proposing recommendations..................................................................7
3.2 Unit cost and pricing decision...................................................................................................7
3.3 Assessment through investment appraisal technique.................................................................8
TASK 4...............................................................................................................................................10
4.1 Financial statements.................................................................................................................10
4.2 Comparison between financial formats...................................................................................10
4.3 Ratio Analysis..........................................................................................................................10
CONCLUSION...................................................................................................................................11
REFERENCES...................................................................................................................................12

INTRODUCTION
Management of financial resources refers to effectively allocating monetary fund in a
business. The financial manager is responsible to manage the resource in a way so that it can be
utilised to their maximum capacity. Managing finance is a crucial aspect for the financial manager.
Due to the fact that finance is the main element help to operate business activity. For managing the
finance, the manager makes different strategies so as to effectively achieve his/her objectives.
Another aspect of financial management is decision making ability of a financial manager. The
organisation must make accurate decision regarding management of financial resources of the
company.
The report discusses the financial management of Sweet Menu restaurant and Blue Island
restaurant. The main objective of the research is to identify appropriate financial resources for
Sweet Menu restaurant. It is vital for the restaurant owner to select a financial source to raise the
capital. As the organization wants to raise €300,000 and €500,000 for its branches in Central
London and Croydon various options are evaluated in order to choose correct source to raise
finance. On the other hand, the research also highlights the importance of financial statement for the
Blue Island restaurant. The owner of the restaurant wants to evaluate the effectiveness of a financial
statement. This report conducts a study to properly analyte various statements and their significance
to an organization.
TASK 1
1.1 Available sources of finances
Available sources of funds refer to the current accessible funds for a business. Source of
finance are bifurcated into two types i.e. long term finances and short term sources of finance. Long
term sources provide financial assistance that can be used for more than one year whereas short
term is supposed to be used within a year. Sweet menu restaurant wants to expand its business on
two locations, thus the first step must be to identify appropriate source of finance. They are as
followed.
Long term source are-
 Retained Earnings- The business can use the earning that has been retained by it. Each
year the business can store a portion of its earnings from the profit or may distribute it to the
shareholders or the debenture holders. These earnings can be saved by reducing the dividend
given to the shareholders.
 Long term loan- A loan is an amount which is taken on credit basis from the financial
institution or a bank. The business which is applying for a loan has to agree to deposit a
security in order to acquire loan as well as the company is entitled to pay for an interest

amount in each instalment.
 Share Capital or Debenture- The business can also raise an IPO i.e. initial public offering.
In this, the public invests a portion of their income in the business by acquiring ownership of
business in the form of shares or debentures. The company does not have to pay interest
over the raised amount but each year they can pay back profit in the form of dividend to the
shareholders. Venture Capital- A venture capitalist is a person who is eager to invest his/her income in
other business. These individual are generally bothered to receive the ownership or a certain
amount of profit in return to their investment.
Short term sources are-
 Trade/Cash Credit- This credit is given by traders or the banker on the basis of cash or
inventory. The trader or the banker may lend money or goods to the business on credit
business. The business is entitled to pay back the amount to the respective person within a
period of 90 days.
 Hire purchase and leasing- These are loans which are provided to the business while
purchasing inventory or machinery for the organization. The business can purchase
machinery or inventory and can pay the amount either in instalment or on lease basis.
1.2 Implication of the sources
Sources Legal Implications Financial Implications Dilution of
ownership
Share Capital/
Debenture
All the facts and
figure and
rules/regulations must
be stated to the
investors. The
formulation made by
the legal framework of
the country is
mandatory to be
followed so as to
avoid any fine or
charge.
As shareholder does not
agree to retain earnings,
the business is not able
to save for future use.
Also in the case of
insolvency the investor
may cease companies
retained earnings to
recover their dividend
amount.
The ownership of the
shares/debentures
passes to the
respective purchaser
only.
Retained Earning The shareholders in The profit in the There is no dilution to