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Financial Planning in Sweet Menu Restaurant Ltd | Report

Added on - 03 Feb 2020

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MANAGING FINANCIALRESOURCES ANDDECISIONS
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Types of Sources of Finance............................................................................................11.2 Implications of sources of Finance...................................................................................21.3 Evaluation of Most Appropriate sources of finance for theRestaurant...........................2TASK 2............................................................................................................................................32.1Analysis of costs for different sources of finance.............................................................32.2 Importance of Financial Planning....................................................................................32.3 Assessment of information needs of different decision makers.......................................42.4 Impact of Sources of Finance...........................................................................................5TASK 3............................................................................................................................................53.1 Analysis of Budgets..........................................................................................................53.2 Calculation of Unit costs of Items and pricing decision...................................................63.3 Assessment of viability of investment appraisal techniques............................................7TASK 4............................................................................................................................................84.1Main Financial Statements................................................................................................84.2 Format-financial-statement...............................................................................................94.3 Accounting ratios............................................................................................................11Conclusion.....................................................................................................................................12REFERENCES..............................................................................................................................12
INTRODUCTIONThe management of financial resources is an important element in operating business.Different organizations render different services which require money to finance those services(Higgins and Gulati, 2006). Management of financial resources means getting benefits fromfinancial resources which is possessed by the organization. To achieve the best financialmanagement, there should be a proper plan in a company. To promote success of anorganization, entrepreneur is required to keep enough resources to operate sufficiently andefficiently (Rose and Hudgins, 2014). In this context, analysis of requirement of financialresources and importance of financial planning in context of Sweet Menu Restaurant Ltd andcomparison of projects of the said company and Blue Island Restaurant has been presented inthisreport.TASK 11.1 Types of Sources of FinanceThere are two sources of finance one is internal and other one isexternal for new business, existing business or in case of expansion of business etc. (Darroch,2005).Various sources of finance are capital markets i.e. new shares issue, loan stock, retainedearnings, bank borrowings, government grants, venture capital and franchising etc. In short,sources of finance are of two types debt and equity finance.Debt finance is external source of finance provided by external lender. For example bankloan, debenture issue etc.Equity finance is internal source of finance provided by shareholders of the company. Forexample issue of equity and preference share capital, retained earnings etc.There are different sources of finance for expansion of an ongoing business. In given caseof Sweet Menu Restaurant which is engaged in restaurant business, its four owners are planningto expand the business by establishing its two branches in Central London and Croydon. Theyneed different sources to finance for expanding new business. The first source of finance for anexisting company is earnings retained by them for future period. Investors who want to invest inthis expansion can also be treated as another source of finance (Becker and Huselid, 2006).Further, public offer for issue of share capital can help in funding expansion. Other sources arebank loans, investor’s money, government grants etc. (Swayne, Duncan and Ginter, 2012).1
1.2 Implications of sources of FinanceAt the time of starting a new business or at the time of its expansion, source of finance tobe chosen should be correct because if the selection is wrong it might create hindrance for thecompany (Amit and Schoemaker, 2012). Following is the analysis of different sources of financeand their implications.Funds raised from investors:The investors are major source of finance for a company(Mathauer and Imhoff, 2006). This company while expanding its business cannot raiseentire capital alone; the firm needs investors for finance. Investors can be the presentstakeholders as well as the outsiders.Bank Loans:Banks are considered as an external source of funding (Chandra, 2011).The management of the company can take loans from banks at a nominal interest rate,chargeable at fixed intervals. Thecompany will be able to easily repay bank loans, oncethey have secured their position inmarket.Government Grants:The UK Small Business Administration provides help to newventures and supports existing ventures in the expansion (Darnall and Edwards, 2006).Grants are given by government for expansion of restaurant along with interest paymentat lower rate than the banks.1.3 Evaluation of Most Appropriate sources of finance forthe RestaurantSources which provide consistency, accountability, transparency, integrity etc areconsidered as the most appropriate source of finance (Shapiro, 2008). The restaurant isexpanding its business in other parts of London so it needs to be financed through varioussources. Equity share capital is the best source of finance for a company, because the sharesbecome famous among the various investors in the market. (Kaplan and Atkinson, 2015). Bankloan will help them to get higher amount of loan at relatively low interest payment within a fixedperiod. Other source of finance i.e. government grant is helpful in its initial periods of expansiononly by fulfilling certain conditions. Assets which are needed in the restaurant can be taken onlease for a fixed term by paying lease rentals. Retained earnings are also an appropriate sourcebecause they are used in case of emergencies only. Investors can also help in the expansionprocess of the company. Venture capitalists are thebest source of finance for this company, sinceit is an established restaurant and famous for its best services and earning revenues therefore theycan take help from venture capitalists.2
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