Financial Resource and Decision Making Case Study
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Added on 2019-12-18
Financial Resource and Decision Making Case Study
Added on 2019-12-18
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Financial Resource and Decision Making; Case look atof Clariton Antiques Ltd
Table of ContentsFinancial Resource and Decision Making; Case look at of Clariton Antiques Ltd.........................1Task 1; The sources of finance available to;...................................................................................2Unincorporated Business.................................................................................................................2Internal Source.............................................................................................................................2Share capital.............................................................................................................................2Retained earning.......................................................................................................................2External Sources..............................................................................................................................2Bank loans....................................................................................................................................2Bank overdrafts............................................................................................................................3Share capital.................................................................................................................................3Business Angels...........................................................................................................................3B) Incorporated business.................................................................................................................41.2 The implications for the use of;.................................................................................................4A.) Internal resources of finance..................................................................................................4Internal Funding in preference to Bank Financing......................................................................4Internal Funding versus Offering Stock.......................................................................................4Internal Funding as opposed to Government Grants...................................................................4Internal Funding instead of Offering Assets................................................................................5B) External deliver of fund..............................................................................................................5Safeguarding the Resources.........................................................................................................5Growth.........................................................................................................................................5Ownership....................................................................................................................................6Interest..........................................................................................................................................61.Three The maximum suitable sources of finance for Clariton Antiques Ltd...............................6Working with Investors................................................................................................................6Crowd financing...........................................................................................................................7Debt Based Financing..................................................................................................................7Task 2...............................................................................................................................................7
Analyse the costs of the two sources of finance under consideration.............................................72.2 The importance of financial planning for Clariton Antiques Ltd..............................................8A) Budgeting................................................................................................................................8B) Implications of inability to returned satisfactorily..................................................................9C) Overtrading...........................................................................................................................102.3 Assessment of the information that will be needed to make decision on financing the takeover by.....................................................................................................................................10a) The patners.............................................................................................................................10Venture capitalist (We Finance Limited)...................................................................................11Finance brokers..........................................................................................................................112.4 The impact on the financial statements if Clariton Antiques Ltd choose to go with...............11Venture capitalist.......................................................................................................................11Finance brokers..........................................................................................................................12Task 3.............................................................................................................................................133.1 Analyses of the cash budget for Clariton Antiques.................................................................133.2 How unit costs will be calculated to make pricing decisions..................................................133.3 The viability of the projects using NPV investment appraisal techniques..............................13NPV............................................................................................................................................13Pay back, period.........................................................................................................................14Average Rate of Return..............................................................................................................15Task 4.........................................................................................................................................164.1 Discuss the key components of financial statements...........................................................16Income statement.......................................................................................................................16Statement of cash flows.............................................................................................................16Statement of adjustments in equity and profits..........................................................................16Statement of cash flow...............................................................................................................16Notes to the economic statement.............................................................................................174.2 Comparing the format used by Clariton Antiques Ltd to presenting their financial statement with that of a partnership...............................................................................................................17The Statement of Equity............................................................................................................17The Income Statement...............................................................................................................18
The Cash Flow Statement..........................................................................................................184.3 Interpreting the recent financial statement of Clariton Antiques Ltd using appropriate ratios and making comparison with the previous year............................................................................18Task 1; the sources of finance available to;A,) unincorporated business1.)Internal source Retained incomes This is the cash that is produced when business makes profits (Gross income less expense n taxand Dividends). Retain earning is deem as the best and cheapest source of capital for the company. Share capital The shareholder of a start up company is required under the company law to provide partner’s capital for the business based on agreed capital contribution ratio to finance the business operationsExternal sourcesA bank loanBank loan offers a long time type of finance for a start-up, with the financial institution expressing the settled period over which the credit is given (e.g. 10 years), amount of loan and principle sum. The bank will typically requires that the start-up to provide some safety to the loan, in spite of the reality that this safety commonly comes as individual assurances with the aidof the Audited financial statement in order for the bank to evaluate the business performance andwhether it is viable to be given loan (Ehrhardt, 2016). Financial institution credit is useful for financing interest in settled resources and is for the most component at lower rates.
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