(PDF) Managing financial resources and decisions Assignment
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Added on 2020-01-28
(PDF) Managing financial resources and decisions Assignment
Added on 2020-01-28
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Managing financial resourcesand decisions
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Identification of sources of finance available to business.....................................................31.2 Implications of sources of finance identified.........................................................................41.3 Evaluation of most appropriate sources of finance................................................................4TASK 2............................................................................................................................................52.1 Costs of different sources of finance for Sweet Menu Restaurant.........................................52.2 Importance of financial planning for Sweet Menu Restaurant..............................................62.3 Information needs of different decision makers....................................................................72.4 Impact of sources of finance on financial statements of Sweet Menu Restaurant.................7TASK 3............................................................................................................................................83.1 Analysis of budgets and make appropriate decisions............................................................83.2 Calculation of unit costs and pricing decisions......................................................................93.3 Viability of two projects using investment appraisal technique..........................................10TASK 4..........................................................................................................................................114.1 Main financial statements....................................................................................................114.2 Comparison of appropriate formats of financial statements for different types of business....................................................................................................................................................124.3 Interpretation of financial statements of two restaurant using ratios...................................13CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................152
INTRODUCTIONFinancial management is referred to as a field where decision making regardingutilization and allocation of funds takes place. It involves efficient and effective management offinancial resources that leads to attainment of success by the organization. With the assistance ofthis, harmonization of individual’s motives can be done with that of business goals (Hall andLerner, 2010). Therefore, the role of financial management can be greatly viewed towardsplanning and controlling in relation to monetary resources.In the present report, management of financial resources and decisions has beendiscussed with respect to Sweet Menu Restaurant. It is a reputable restaurant that is situated inGants Hill in East London. The firm is renowned for offering intercontinental menus atreasonable prices. The present report entails to understand the sources of finance available to thebusiness. Further, it includes implications of financial sources within organization. At last, thisreport also covers analysis of financial performance of Sweet Menu Restaurant. TASK 11.1 Identification of sources of finance available to businessAs per the case, Sweet Menu Restaurant is a reputable firm that offers inter-continentalmenus at reasonable prices. The organization is planning to open two branches in CentralLondon and Croydon. It has been estimated that restaurant requires £300,000 and £500,000 tostart up proposed new branches. This calls for the needs of financial resources. Sources offinance are divided into two. This includes internal and external. These have been enumerated inthe manner below:Internal sources: It includes sources that are present within the organization. Further, for thepurpose of obtaining funds through such sources, business has to put little efforts. Owners personal saving: It is an amount that is being saved by the owner. This can beused with the aim to meet expansion need of business (Calitz and Fourie, 2010). Such canbe used by individual while starting up new firm. Retained earnings: It is regarded as the part of profit that is kept aside with the aim tomeet future contingencies. This can be used by Sweet Menu Restaurant in order toaccomplish its financial needs in an effective manner. 3
External sources: It is comprised of sources that can be obtained by business from outside. Issue of shares: Through issuance of shares, firm can gain long term funds from public.The amount which is received by the restaurant can be utilized as start-up capital by theorganization. Long term bank loan: Bank acts as effective financial source that lends funds to businessfor the specified time duration (Du and Girma, 2012). With this, new concern can fulfilltheir long term needs. Such funds can be utilized with the aim to carry out businessoperations in an appropriate manner. 1.2 Implications of sources of finance identifiedFinancial sources available to new business possess certain implications. When, firmmakes use of personal saving then, in such case there is dilution of control. This implies thatindividuals lose control over the amount that could have been used in fulfilling the needs ofbusiness in future course of time. In addition to this, there are certain implications associated when new business obtainsfunds through external sources. In order to start up new business, Sweet Menu Restaurant takesloan from bank. For this, it has to keep certain assets as a part of security. In situation, whenbusiness does not make payment of interest on time then at this situation, bank can take legalaction against the organization (Fabbri and Menichini, 2010). Moreover, financial institution canacquire all the assets of business in order to recover the amount borrowed as loan. If, in case,amount is not recovered through asset then bank declares firm as bankrupt. This has greaterimpact on the credit rating of new business. Further, this affects the reputation of corporation to agreater extent and influences its survival in the market for longer run. Sweet Menu Restaurantalso obtains funds through issue of shares. An implication to such is that in case firm does notmake timely payment of dividend to the shareholders then they can take legal action against thebusiness. Such greatly affects the goodwill of new concern in the marketplace. 1.3 Evaluation of most appropriate sources of financeFor the purpose of starting up new business, the most appropriate sources of finance areas follows: Retained earnings: In accordance with the case scenario, Sweet Menu Restaurant requires£300,000 and £500,000 to start up proposed new branches. Based upon the evaluation4
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