Capital Budgeting Practices and Sources of Funds

This assignment delves into the practices of capital budgeting, examining various investment appraisal techniques utilized by firms to evaluate projects. It also explores diverse sources of funding available to companies, ranging from debt financing to equity investments and internal resources. The assignment draws upon academic research and real-world examples to provide a comprehensive understanding of these crucial financial concepts.

MFRD

Table of Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
A..............................................................................................................................................................3
B...............................................................................................................................................................6
TASK 2..........................................................................................................................................................6
A..............................................................................................................................................................6
B...............................................................................................................................................................7
C. .............................................................................................................................................................9
TASK 3..........................................................................................................................................................9
A..............................................................................................................................................................9
B.............................................................................................................................................................11
C. ...........................................................................................................................................................12
TASK 4........................................................................................................................................................14
A............................................................................................................................................................14
B.............................................................................................................................................................16
4C...........................................................................................................................................................17
CONCLUSION.............................................................................................................................................19
REFERENCES..............................................................................................................................................20

INTRODUCTION
Financial planning refers to the process of procurement, utilization and proper
management of money to control overspending, meet capital as well as daily business need,
maintain cash surplus and so on. Every company involves in such activities may be either to start
a new business or expand existing business in new markets. This assignment will guide an
individual about various ways through which they can gather money to meet out their financial
commitments. Moreover, the report will also highlight the key differences among all the sources
on the basis of legal, financial, dilution, and bankruptcy implications to identify the best source
of money. Along with this, report will guide about various managerial techniques that how
money can be managed properly through financial planning and cash budgeting. Apart from this,
sometimes, businesses require huge amount of funds to pay capital expenditures like to buy
property, machinery and equipments. It can drive both the risks and return to the entity,
henceforth, companies have to identify the project that will yield better return. In order to fulfill
that objective, project evaluation techniques will be considered best as it examine both the risk
inherited and possibility of return so as to determine the most profitable and beneficial project.
At the closure of the report, it will analyze differences in the financial reporting requirement of
different organizations i.e. sole trader, partnership and company.
TASK 1
A
In order to finance long-term contract, Radisson Plc can choose any of the below
mentioned sources or combination of one or more financial source depending upon the time
period and amount of money. It can be categorized into three parts, that are explained hereunder:
Traditional financial sources:
Retained profits: Sum of profits that not had been reinvested or distributed among
shareholders by Radisson Plc is called retained or residual yield (Broadbent and Cullen 2012). It
can be used by the company to meet out their capital need for the contract without any legal
obligation and financial cost.

Ownership capital: It refers to the money invested by shareholders and can be used for
large expenditures, new product development, setting new plant and business expansion. In such
regards, listed companies can opt for either right issue or deferred ordinary shares to raise
money, whereas unquoted companies can issue shares over the counter market. There are two
options available to Raddison Plc, one is issuance of ordinary shares and second is preference
shares. Out of these, ordinary investors have right to vote and share company’s profits, however,
preference share holders are just entitled to get a fixed rate of dividend.
Non-ownership capital:
Bank loan: Radisson Plc can typically borrow money from the lenders and meet their
financial commitments. In this, money can be raised at a predetermined interest rate along with a
fixed schedule of repayment.
Hire purchase: It allows business unit to use an asset in regular operations without the
requirement of paying complete buying price at the point of purchase. It is because; company
just need to pay some amount of money as initial or down payment and remainder can be paid in
equal periodical instalments.
Factoring: Radisson Plc can discount their outstanding invoices to raise money, generally
used to resolve the financial difficulties of cash shortage. In this, factoring company charges
some interest and repays remaining balance that is generally equal to 85% of the total invoice
amount.
Implications of financial sources:
Source Legal Financial Control transfer Bankruptcy
Retained profit No legal
obligations
exists.
No financil cost
involved in
utilizing profits.
Ownership rights
are available to
shareholders
only.
No bankruptcy.
Owners capital Following stock
exchange
regulations and
altering the
authorized
capital clause in
memorandum of
Dividend to the
shareholders to
fulfill their return
expectations. On
prefernce share, it
is fixed, whereas,
equity shares have
Equity or
ordinary
shareholders
have authority to
make business
decisions,
henceforth, it
Owners have
liability to repay
capital to the
lenders, creditors
and other
external parties,
after that, firstly,

association. ownership over
residual earnings
(Huang, Ritter and
Zhang, 016)..
Moreover, cost of
issuing shares,
printing and
administrative fees
are also included in
financial cost.
transfer
controlling
power to owners.
capital will be
repai
d to preference
share holders and
remmaining
money is
available to
equity
shareholders.
Bank loan Legal formalities
with bank loan
processing and
procedural
requirement is
necessary (Drury,
2013). Moreover,
Radisson Plc
may be require to
file their finacial
statements and
keep any assets
as collateral
security to
provide financial
security to
lenders.
Interest needs to
paid on right time
which may be fixed
or fluctuating.
On short-term loan
period, bank
charges a low rate
of interest,
however, on long-
term they charge
higher interest rate.
Lenders have no
authority to vote
in the board
meetings,
henceforth, they
do not have right
to take corporate
decisions.
Lenders are the
first priority,
henceforht, if
Radisson Plc
declared
banckrupt
investors will pay
money first to the
lenders.
Hire purchase Vendor and
Radisson Plc
needs to arrange
a contract,
containing all the
terms and
conditions.
Interest on the
amount of
installments
depending upon the
duration of renting
is financial
obligations.
Not exists. Original asset
owner can get
back their assets,
if business goes
banktupt (Huang,
Ritter and Zhang,
016)..
Factoring Factoring
company and
Radisson Plc
agree with each
other to discount
outstanding
invoices.
A discount that is
charges by the
factoring
organization to
deliver fund before
maturity date is its
financial
implication.
Not exists. They have right
to receive money
from the original
debtors.

B
Out of above discussed sources, loans are considered suitable for Radisson Plc. The
reason behind this is although loan impose liability to the company to pay a fixed rate of interest
on a right time. But still, if corporate manage profitability and cash flows accordingly, than it can
meet out their debt obligations and minimize tax obligations also. It is because in UK, taxation
authority Her Majesty Revenue and Customer (HMRC) declare that the amount of taxes which
companies paid on their borrowings will not be taxed, alternatively, we can say interest as
deductible or allowable expenditures (Drury, 2013). One more reasons for suggesting loans is that
if owner wants to put their control over business functioning than they can easily do it with debt
utilization. It is because; it prevents transfer of ownership to the others, as a result, managers can
make decisions by themselves without any involvement of external parties such as lenders.
TASK 2
A
Cost of equity versus debt financing: As said earlier, that on equity share capital,
Radisson Plc is not liable to pay predetermined rate of return (Huang, Ritter and Zhang, 2016).
Moreover, the cost of issuing and printing shares, listing fees in stock exchange and
administrative fees are also included in cost. However, on the other side, on the borrowed
money, Radisson Plc’s financial executives have to manage cash flows so as to pay installments
on due date and repay borrowed money on maturity date. It also has to file its annual accounts to
represent information to the lenders about their financial status, profitability, solvency, debt
burden capacity, interest payment ability and credit worthiness (Sources of funds, 2014). Although,
rate of dividend on equity is not fixed, while on debt capital, it is fixed, but still, loans are
considered beneficial because tax benefits are available on loan facilities. Moreover, equity
capital transfer controlling power to owners whereas it is not so with the borrowed money. All
the evaluation clealry depicts that loan financing are considered cheaper source of finance as
compared to equity, therefore, Radisson Plc must chose this source.
Interest is the cost of debt as Radisson Plc will be requires to pay dividend to the debt
holders as per their loan repayment schedule. However, it provides tax benefits to the fim as
HMRC consider payment of loan as an allowed expense for tax determination.

On the other side, cost of equity is dividend about which company does not have any
legal compulsion, henceforth dividend payment decisions can be taken on the basis of
availability of profitability.
B
Financial planning, also called monetary planning refers to the process of meeting
financial goals through the proper and effective utilization of money. It consists of various
functions such as setting targets, analyzing current financial status, estimating future capital
requirement and coming with a suitable strategic plan or approach to reach goals (De Wit, 2016).
The benefits of the financial planning are described here underneath:
 Prior and advance planning provides direction to the Radisson Plc’s managers about the
way how they can utilize resource optimally and manage cost.
 It also works as an insurance against financial risk which enables Radisson Plc to take
necessary steps to overcome financial risk and adverse shocks like high cost of debt,
sudden increase in supplier prices, and downward movement in demand and so on
(Broadbent and Cullen, 2012).
 With the help of the best financial strategy and plan, management of the firm will be able
to manage effectively their revenues and allocate it in regular functioning, so as to make
sure surplus or positive cash balance.
 It enables Radisson Plc’s executives and directors to formulate various growth, expansion
and development plans and strategic move to reach targets (Huang, Ritter and Zhang,
2016).
 It helps corporate entity to gather sufficient or appropriate quantity of capital sources
from the most suitable financial source at an affordable cost of capital.
Information need
Every person or organization that have some interest or concern in Radisson Plc and
affected by its policies, actions and objectives are called stakeholders. Some of the key
stakeholders along with their information requirement are enumerated underneath:

System developers: It consists of analyst, system designers, programmers, quality
assurance team, trainers and Radisson Plc’s project managers which have high level of stake in
specification of final product as per the customer requirement. System development team highly
focuses to develop software as per the actual requirement or preferences of people.
Users/Consumers: People or businesses that finally operate Radisson Plc’s developed or
designed software are called users. They require information about product features, frequency
of system usage, and experience of system usage and so on. They will only use particular product
or service if it fulfill their expectations.
Legislators: Professional bodies, trade union, quality assurance auditors, legal
representative, governmental agencies and safety executors are called legislators who produce
guidelines and principles affecting designing, developing and operating process of the system.
They need information to know that whether Radisson Plc has complied with acts or not like
Data Protection Act, defense standard, quality manual, auditors by an external auditor and so on
(Speybroeck and et.al., 2015). Moreover, taxation agencies like HMRC gather information about
corporate taxes so as to make it sure that Radisson Plc paid correct amount of taxes on time or
not. If company does not follow any of the law and principle than it gives right to the authority to
charge law suit.
Decision-makers: It encompasses development team managers, financial controller and
other executives. They have power to alter decisions regards to system or software development,
operational processes and set standards.
Shareholders: They just want to make sure that Radisson Plc will pay good return to their
investors as a financial return for the money being invested. They examine risk associated with
their fund, potential yield, business profitability, dividend policy and stock performance to make
solid investment decisions.
Lenders: They lend money after satisfying themselves that Radisson Plc’s executives and
directors will pay timely their fixed loan liability as per the repayment schedule. Moreover, they
assess capital structure to examine financial risk, business capacity to bear more debt burden and
interest payment ability, profitability, liquidity and solvency position also (Coleman, Cotei and
Farhat, 2016).

Employees: Employees are interested in the business to get better salary for respective
efforts, good working conditions, training, welfare activities and various growth opportunity for
their career advancement.
C.
Source of finance Income statement Balance sheet
Equity capital In income statement, profit
residue after meeting out all the
expenditures is reported as net
earnings, out of which, dividend is
distributed to the investors and
remainder is called retained profit
(Esteban-Guitart and Moll 2014).
In balance sheet, equity capital
is reported as shareholder’s
equity and remainder profits
after dividend distribution,
called surplus is also addded in
total shareholders’ equity (De
Wit, 2016).
Moreover as per double entry
accounting, in the assets side,
it increase total cash balance
of the Radisson Plc.
Debt financing In profit and loss account, debt
interest is shown as financial cost
and minimizes earning after
interest.
In balance sheet, it is shown
under the head long-term
liabilities.
However, in the assets side,
similar to equity financing, it
raises liquidity sources in the
form of more cash.
TASK 3
A
It is important for Radisson Plc to effectively manage their cash funds so as to eliminate
potential threats due to shortage of money and carry out operations successfully. Cash planning
refers to the prediction of cash incoming and outgoing resulting from future course of actions or
operational activities. With reference to the current scenario, its cash budget is prepared here as
under:
Table 1 Cash budget
Novembe
r
Decembe
r January Februar
y March April
Opening balance 9000 37100 69000 96600 118000
Sales 40000 45000 50000 47000 42000 45000

Total 40000 54000 87100 116000 138600 163000
Expense
Purchase 4000 4200 4500 5000 5600 5200
Salary 8000 8200 8400 8600 9000 900
CAPEX 15000 0 0 0 0 0
Creditors 4000 4500 5200 5800 6000 5000
Total 31000 16900 18100 19400 20600 11100
Net balance 9000 37100 69000 96600 118000 151900
Interpretation
From the cash budget given above it can be seen that cash balance of the firm is
increasing consistently. It can be noted that rate of growth in the value of cash flow is high in the
month of November, December, January and February. However, in other months trend get
changed and growth rate decline sharply (Huang, Ritter and Zhang, 2016). It can be seen from
the budget that sales increase in first three months. Thereafter ti declined sharply and on last
month of the budget it again increase. Interesting fact is the even sales get declined firm
expenses elevate consistently. In last month which is April decline is observed in sales. This
reflects that firm is not tracking changes in the business environment properly. On hope that
business conditions will get improved firm consistently made expenses in the month when sales
is reduced. Firm needs to take its business decisions cautiously.
Table 2 Sales budget
November December January February March April
Forecasted sales units 400 450 500 470 420 450
Price per unit 100 100 100 100 100 100
Total sales 40000 45000 50000 47000 42000 45000
Interpretation
It can be observed from the sales budget that sale of the firm is increasing consistently in
the first three months. However, in the month of February and March sales get decline. Recovery
is observed in same in the month of April. It can be said that sales of the firm is fluctuating.
Explanation of budgets:
Budgets represents a summary of forecasted or anticipated revenues and expenditures
that indicates the results of future business activities.

Benefits of cash budget:
 Forecasting results of potential revenues and spending
 Helps to determine financial problems due to lack or shortage of money
 Facilitates to determine net cash availability
 Enable Radisson Plc’s managers to make optimum or effective utilization of resources
 It can be used to reward or deliver incentive to the employees as per their achievement
 Helps to accomplish financial goals by controlling expenditures and generating target
revenues
B
Fixed cost 40000
Variable cost 80000
Total cost 120000
Number of units 300
Per unit cost 400
Pricing decisions: Under this, Radisson plc can use cost plus pricing technique to
determine their product cost through taking into account an desired profit percentage and total
cost. It is calculated here as follows:
Price = Cost + desired profit percentage
= 400 + (400*30%)
= 400+120
= 520
Interpretation
In computation of cost both fixed and variable expenses are considered. In present case
fixed cost and variable expenses are added and divided by the number of produced units. In this

way per unit cost is computed (Haynes, 2015. Margin percentage 30%is added to the per unit
cost in order to calculate sales price of the product which is 520 for Radisson. Higher the margin
leads to increase the selling price each unit of product or vice-versa.
C.
Investment appraisal method measure strength and risk associated with various capital
projects and determine the best project among all. It enable Radisson Plc and other companies to
assess attractiveness of various projects and thereby chose the most appropriate ones.
Payback period: It is a measure of time period that will be taken by the project to receive
back their original outlay, called payback period (Investment appraisal techniques, 2016).
Shorter duration to recoup the initial investment seems good and more attractive as compare to
the project indicating longer payback period.
Year Project A Cumulative cash flows Project B Cumulative cash flows
0 -200000 -200000 -200000 -200000
1 35000 (-200000+35000)= -165000 32000 (-200000+32000) = -168000
2 43000
(-165000+ 43000) = -
122000 46000 (-168000+46000) = -122000
3 52000 (-122000+5200) = -70000 58000 (-122000+58000) = -64000
4 71000 (-70000+71000) = 1000 70500 (-64000+70500) = +6500
5 68000 (1000+68000)= 69000 74000 (6500+74000) = 80500
Project A = 3 year + (£70,000/£71,000)
= 3.99 year
Project B = 3 year + (£64,000/£70,500)
= 3.91 year
Accounting rate of return: This method gives an idea about future profit percentage based
on money invested in the project (Bierman and Smidt, 2012). According to this technique,
companies must select such project which will deliver higher profit percentage so that Radisson
Plc can maximize their net yield and meet shareholder’s expectations.
Annual average profit / Annual investment *100

Project A = (£269,000/5)/ £200,000*100
= £53,800/£200,000*100
= 26.9%
Project B = (£280,500/5)/ £200,000*100
= £56,100/£200,000*100
= 28.05%
Net present value: Both the above discussed methods do not take into account time value
of currency, but, NPV believes that money has time value, henceforth; project should be
compared by discounting all the predicted cash flows at a given cost of capital, based on interest
rate (Andor, Mohanty and Toth, 2015). This method suggests firms to select high NPV
indicating project as it shows higher return in the future period.
Internal rate of return: IRR identifies the % discount rate at which NPV shows zero
value. In other words, it also can be said that IRR is the cost of capital which equates total
discounted cash flows to the initial outlay of the project. Companies like Radisson Plc and others
often chose project which shows high value of IRR as compare to other proposals.
Regards to the available projects, NPV and IRR are computed here at 10% discounting
rate, as follows:
Year
Project
A
Discounted factor @
10%
Discounted
cash flows Project B
Discounted
factor @
10%
Disc
ount
ed
cash
flows
0 -200000 1 -200000 -200000 1
-
2000
00
1 35000 0.9091 31818.18 32000 0.9091
2909
0.91
2 43000 0.8264 35537.19 46000 0.8264
3801
6.53
3 52000 0.7513 39068.37 58000 0.7513
4357
6.26
4 71000 0.6830 48493.96 70500 0.6830
4815
2.45

5 68000 0.6209 42222.65 74000 0.6209
4594
8.18
IRR/
NPV 9.50% -2859.65 10.81%
4784.
323
Recommendation: From the results of the methods, it has been identified that project B
has shorter time to recoup opening cash outlay to 3.91 year, higher ARR to 28.05%, NPV to
4784.323 and IRR to 10.81%. Henceforth Radisson Plc must chose that project so that it can
generate greater return.
TASK 4
A
A formal or structured presentation of business financial activities and functions so that
it can easily understand by all the stakeholders is called financial statements. Companies like
Radisson Plc and other prepares it on a periodical basis, some of the basic and key statements
acompained by managerial discussion and analysis are presented hereunder:
Balance sheet: Under this statement, Radisson Plc reports about their assets and liabilities
so as to know their financial position and strength, prepared on the basis of following accounting
model:
Assets = Liabilities + Shareholders equity
Liabilities = Assets – Shareholders equity
Shareholders equity = Assets – Liabilies
Assets: It represnts business ownership and can be classed as current and fixed, also
called non-current assets. Assets which can be converted easily into cash, usually within a very
hort span of life of twelve moth, is called current assets i.e. cash and its equivalent, notes
receivables, marketable securities, inventory and others (Kim and et.al., 2016). However, on the
other side, assets which are used by Radisson Plc for a long period is called fixed assets i.e.
property, machinery and building, recorded at historical cost less accumulated depreciation.

Liabilites: It represents proportion of assets that are owned by outsiders, segregated into
short-term and long-term liabilities. In this, current liabilities include short-term debts, payables
and so on which needs to be paid within 1 year. However, long-term liabilities encompasses
debt, lease and other.
Equity: It represent residual ownership as whatever amount of money remained after
repayment to outsiders is available only to owners as residual claimants.
Income statements: It represents summary of entity’s oeprations during a fixed duration
of time i.e. quarterly, half-yearly and yearly (Kim and et.al., 2016). Radisson Plc aims to gain
highest amount of yield, henceforth, it prepares this statement to know their net amount of return,
based on following equation:
Net income = Revenue – Expenses
Revenue encompasses earnings or inflow through delivery of goods and services and
income from other operations i.e. interest on investment, dividend earning and others.
Expenditures refers to outflow of cash such as buy material, payment of workers salary,
promotional spending, research and development and others.
Cash flow statements: Cash is the most liquid form of assets, and companies prepare this
statement to know their net ability to pay bills. It compares actual source of cash from operating,
financing and investing activities with cash usage to identify net balance whether surplus or
deficit.
 Operating activities encompasses regular and daily functions like sales, purchase,
expenditures and others.
 Investing activities include cash inflow and outflow from purchase and sale of long-term
assets.
 Financing activities consists of cash incoming and outgoing through long-term debt
collection, repayment of debt, cash collection through equity capital and its redemption as
well.

B
Basis Sole proprietor Partnership firm Private and public companies
Capital
account
Construct only one capital
accounts
In this, more than one
capital accounts are
prepared based upon
the number of partners
All the shareholder’s investment
are considered as their capital
contribution.
Profit It only belongs to sole
trader.
Distributed among all
the partners in agreed
ratio.
Equity investors are residual
claimants of profit.
Balance
sheet
It present only one capital
account that belongs to
single owner.
It includes each
partner’s capital under
stockholder’s equity or
partner’s capital.
It represents shareholder’s
equity including reserve and
surplus (Florou and Kosi, 2015).
Objectives
or legal
requirement
s
Accounts are prepared for
self-assessment purpose
without any legal obligation
and can be presented in
basic format accordance
with accounting standards
(Kaplan, and Atkinson
2015). Moreover, they are
not subjected to report it to
HMRC without subject to
an investigation.
They prepare annual
accounts by subjecting
to the necessary rules,
compliance with GAAP
and partnership law,
but still, have no
liability to report to
HMRC.
Radisson Plc prepares its annual
accounts by complying with the
provisions of company act,
2006, IFRS and IAS. Moreover,
it also need to submit annual
accounts to HMRC for
computing taxation obligations.
Auditory
compliance
No need No need Radisson Plc posses legal
liabilities to audit their annual
financial reports by an
independent auditor to make it
sure that its acccount represents
true return and financial status.

Publish Do not publish Do not publish Publish reports to communicate
with external stakeholders i.e.
shareholders, regulatory bodies
and others.
Reporting They generally report to
bank and financial
institutions to comply with
the legal requirements and
get loan.
Same as sole trader Radisson Plc must report their
financial statements to UK
taxation authority, HMRC,
commercial banks and financial
institutions as well.
Withdrawal
of profits
It is shown as drawing and
subracted from the amount
of owner’s capital in
balance sheet (Huang, Ritter
and Zhang, 2016).
If partner withdraw
capital from the
business, then it is
shown in debit side of
partner’s capital
account and decrease
the amount of their net
capital contribution.
Withdrawal is reported as
drawing and decrease total
shareholder’s equity, however,
in the assets side, it decrease the
net cash position of Radisson
Plc.
4C
Interpretation of the financial results of Radisson Plc with its competitor
Profitability ratio
Radisson
Plc
Competit
or
Gross profit 2626 7615
Net profit 780 348
Sales revenue 17072 11663
Gross profit ratio GP / net sales * 100 15.38% 65.29%
Net profit ratio NP / net sales * 100 4.57% 2.98%
Liquidity ratios
Current assets ' 3371 3557
Current liabilities 5147 2684
Inventories 260 541
Current ratio Current assets / current liabilities 0.65 1.33
Quick ratio (Current assets – Closing stock )/ current liabilities 0.60 1.12

Efficiency ratios
Revenue 17072 11663
Total assets 24140 26211
Assets turnover
ratio Revenue/total assets 0.71 0.44
Inventory
turnover ratio Net sales/inventory 65.66 21.56
Solvency ratio
Debt 8197 10641
Shareholders
equity 5357 5899
debt to equity
ratio Long-term debt/shareholders equity 1.53 1.80
Profitability ratios: GP ratio of Radisson plc has been computed to 15.38% less than
that of competitor firm because its GP ratio was reported to 65.29%. It indicates that competitor
is generating good gross margin on their total sales made. However, on the contrary side, net
profit ratio of Radison Plc is much better to 4.57% than competitors ratio of 2.95% demonstrates
that Radisson acquired high net profit through exceeding their total revenues to total
expenditures made. It indicates that its operational performance is much better, however,
overspending is the main reason behind poor profitability margin in competitor firm.
Liquidity ratios: This ratio demonstrates firm's ability to make timely payment to their
suppliers and short-term creditors. Both the current as well as quick ratio of competitor
organization is greater to 1.33:1 and 1.12:1 whilst Radisson's ratios had been derived to 0.65:1
and 0.60:1 demonstrating that competitor is much able to make deferral payments on right time
to the creditors as it has enough resources available in the business. In order to achieve the target
ratio of 2:1 & 1:1, Radisson plc must maximize their current assets i.e. inventory, cash and its
equivalents, short-term investment, receivables and others to strengthen their liquidity position.
Efficiency ratios: Radisson Plc's assets turnover ratio is greater to 0.71 compare to the
competor's firm of 0.33 times shows that first company's managers utilized corporate assets in an
optimal manner to gather sufficient revenue. Similarly,, inventory turnover ratio is also higher to

65.66 times whilst competitor has 21.56 times entails that stock is effectively utilized by
Radisson to gather better turnover.
Solvency ratios: Debt-equity ratio is utilized to measure solvency position means
capability of the firm to pay long-term liabilities on maturity date. In Radisson Plc, it is
computed to 1.53:1 whereas competitor's firm has ratio of 1.80 times indicating that there is high
level of debts in competitor business at a high investment risk. However, Radisson Plc's ratio is
greater than target ratio of 0.5:1, henceforth, there is an area of concern for the mangers to reduce
their long-term borrowings and collect more share capital to strengthen their solvency position.
CONCLUSION
Summing up the report, it is clear that different types of source have differnet costs,
henceforth, companies have to examine potential impact of all the sources and took financial
decisions very carefully. With regards to Radisson Plc, bank loans is identified suitable source
just because tax benefits and no dilution of control. However, capital budgeting techniques
identified project B as most suitable source which will yield higher return to the company. Apart
from this, report suggested managers to make budgets to set tagets and measure actual
performance by preparing annual financial statements. With the help of this, they can compare
actual performance with the targets and take better managerial decisions to sustain in highly
competitive age.

REFERENCES
Books and Journals
Andor, G., Mohanty, S. K. and Toth, T., 2015. Capital budgeting practices: a survey of Central
and Eastern European firms. Emerging Markets Review. 23(6). pp. 148-172.
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