Financial Resources and Performance Management

This document discusses the importance of financial resources for organizations and the role of performance management. It evaluates the impact of financial decisions on the organization's financial statements and the relevance of this impact. It also critically analyzes the role and limitations of budgets in managing and controlling expenditure, and explores the role of activity-based approaches and strategic management accounting in analyzing decisions. The document is based on a case study of Bentley Motors.

Financial Resources and Performance Management

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY..................................................................................................................................................3
1. Evaluate the impact of the decision on the organization’s financial statements and the relevance of
this impact on the decision......................................................................................................................3
2. Critically analyze the role and limitations of budgets in managing and controlling expenditure.
Approaches to driving value through better budgeting...........................................................................5
3. Appraise the role of activity based approaches and strategic management accounting in analyzing
the decision.............................................................................................................................................7
4. Assess the potential for and use of best-in-class benchmarking to support the decision process.......9
5. Appraise the role of treasury management in supporting the decision.............................................11
CONCLUSION.............................................................................................................................................12
REFERENCES..............................................................................................................................................14

INTRODUCTION
The term financial resources can be defined as those resources that consists all monetary
aspects such as cash, funds, loans and many more. These financial resources are too crucial for
companies in order to perform range of business activities (Salehi, Mahdavi and Tarighi, 2019).
In the absence of proper financial resources this may become difficult for companies to sustain in
competitive environment. Performance management is the process to ensure that the sequence of
functions and inputs meets the goals of the enterprise in an effective and timely way.
Performance management is focused on the performance of organizations, a unit, a worker, or
the procedures in needed to handle specific task. The project report is based on a company that
is Bentley Motors which is a British manufacturer and marketer of luxury cars. This company
was founded in year 1919 and located in London, United Kingdom. In the report, a strategic
option has been chosen by above company is “investment in new technology”. This can be
evaluated by help of different kinds of investment appraisal methods. The project report covers
detailed information about impact of decision on companies as well as limitations of budgets.
Along with role of treasury management is also explained in the report.
MAIN BODY
1. Evaluate the impact of the decision on the organization’s financial statements and the
relevance of this impact on the decision.
Financial accounting enables an enterprise to keep records of all money transfers. It is the
responsibility of the business documents and reviews all the financial information that goes into
and out of its operational activities (Bai, Satir and Sarkis, 2019). The financial reporting data are
collected on a series of financial declarations such as the balance sheet, assertion of revenue and
statement of cash flow. Companies adhere to a sequence of accounting standards in their
financial reporting. Most U.S. publicly traded companies’ follow the generally accepted
accounting principles (GAAP), a common set of auditors follow when completing their income
reports. Except the U.S. corporations typically adopt certain global standards which differ by

area and culture. Financial planning is a way for companies to track their operational activities
but also to include a picture of their economic condition. A company gives shareholders and
borrowers more authority in their decision-making by providing information via a wide range of
declarations such as the financial statements and statement of comprehensive income. Financial
statements relate to common procedures to give stockholders an accurate representation of a
company’s financial, such as their revenues, expenses, earnings, capital and working capital, as
structured documents that can provide in-depth insights into financial data. When analyzing the
financial statements, the most obvious feature is that it gives investors the opportunity to invest
about choosing to invest their money in a particular company. Analysis of financial results is
important for policy departments in determining the taxes owed to the business (Khan, Yang and
Waheed, 2019).
There are three main areas where financial accounting helps decision-making:
 It gives stakeholders with a base point of assessment for the fiscal viability of financial
assets-issuing corporations — and comparisons between them.
 It helps lenders evaluate corporate solvency, cash flow and financial health.
 It lets companies make choices on whether to distribute finite money, along with its
relative, administrative accounting.
Investing decision- Fundamental modeling is highly based on a company's balance sheet, cash
position and revenue statement. All financial reports for publicly listed enterprises are formed
and confirmed in accordance with the Financial Accounting Standard Board (FASB) norms.
Investors use the financial reporting details to make assumptions about a share profits and
financial health. Despite the details presented by the financial statements, creditors will have no
knowledge of the stock and bond issuers' past and overall financial performance. The FASB’s
responsibilities standardization phase in the scheduling and appearance of accounting records,
meaning investors are less susceptible to financial reports that has been processed depending on
the latest situation of a firm.

Lending decisions- Cost reporting also represents a key for lending institutions. Even though
financial reports outline all of its resources and short- and long-term debt, borrowers get a clearer
idea of the credit ratings of a corporation (Lee, Adbi and Singh, 2020). A number of major
financial ratio on which lenders rely, including the debt-to - equity (D / E) ratio and the quick
ratio reasonable alternative, are extracted from the financial statement. Even for privately run
enterprises that do not inherently fulfill the requirements of the FASB, no mortgage lender shall
be liable for a big company loan without the important information made by banks cost
accounting. Unquestionably, a borrower needed to understand how much risk involves loaning
money to a corporation, which can be dictated by analyzing the project financial reporting of the
corporation. The borrower will also be able to identify precisely how much to loan and at what
investment rates once this is ascertained.
Bentley motors takes effective lending decisions by computing different kinds of ratios which
are as follows:
Gross profit ratio- Gross profit / net sales * 100
2017 2018
Gross profit 43549 46350
Net sales 229550 235849
Gross profit ratio 18.97% 19.65%
Interpretation: The above calculated ratio is indicating that in year 2017, gross margin was of
18.97% that raised and became of 19.65% in year 2018. This shows that company was able to
reduce their cost of sales in this year 2018 compared to year 2017.
Net profit ratio- Net profit / sales *100
2017 2018
Net profit 11463 12153

Net sales 229550 235849
Net profit ratio 5.00% 5.15%
Interpretation: This table indicates that company’s net margin was of 5% that increased in year
2018 and became of 5.15% in year 2018. It shows the efficiency of company to produce higher
return in year 2018 after deducting all expenses.
Current ratio- Current assets / current liabilities
2017 2018
Current assets 160112 183536
Current liabilities 160389 167968
Current ratio 0.99: 1 times 1.09 : 1 times
Interpretation: From both years’ current ratio, it can state that company is not able to generate
ideal ratio that is of 2:1 times. In year 2018, the ratio was of 0.99:1 times that shows that
company had 0.99 assets to pay 1 times of liabilities. While in year 2018, this ratio was of 1.09:1
times. Therefore, company’s liquidity position is not good.
Quick ratio- Quick assets / Current liabilities
2017 2018
Quick assets 119697 137791
Current liabilities 160389 167968
Quick ratio 0.75:1 times 0.82:1 times

Analysis- Similar to current ratio, the quick ratio of company is also lower than ideal ratio that is
of 1.5:1 times. As in year 2017, this was of 0.75:1 times that raised by small margin and became
of 0.82:1times. This shows that company does not have enough current assets to pay their short
term expenses.
Corporate governance- Reliable financial reporting not only serves potential investors but also
the companies themselves as a typical strategy (Jain, Celo and Kumar, 2019). The most apparent
incentive for firms to finish their financial statements is fulfilling the legal and regulatory
requirements defined by (public) firms. Companies have to be truthful with their financial
practices and the reports have to be reliable and frequently released. Beyond legal and legislative
barriers, financial accounting can help supervisors build budgets, recognize public perceptions,
track effectiveness, evaluate product quality, and create short-and long-term strategies.
2. Critically analyze the role and limitations of budgets in managing and controlling expenditure.
Approaches to driving value through better budgeting.
Budget- The budget is an estimate of income and expenses over a determined period of time and
is four integrated and re-assessed on a recurring basis (Hanchar, 2019). Budgets can be decided
to make for a person, a business, a security apparatus, or anything that created the financial
crisis. In the aspect of Bentley motors, different kinds of budgets are used in order to take
effective decisions regards to income and expenses. Herein, below role and limitation of budgets
is mentioned that is as follows:
Role of budgets: Budgeting and cost monitoring contains the research approximation of
expenses, the establishment of accepted budgets and the controlling costs of the budget. Its
objectives are the development of budgets and alignment with funding; the implementation of
revenue and expenditure management systems.
Bentley motors use cash budget which is useful for adequate use of financial resources in an
effective manner. Eventually, cash budget can be defined as a type of budget that estimates
future cash receipts and payments during a particular time period (Hussaini, 2019). By help od
this, their finance managers become able to know about need of financial resources for upcoming
time period.

In the context of Bentley motors, budgets play a key role for management of their financial
resources. A budget has below mentioned advantages such as:
 Cost estimating- When a budget has been developed, the project manager can decide how
much money will be expended on each part of the project. It also defines, therefore,
which percentage of the funds available can be allocated to the surviving activities of the
system. It gives the opportunity to decide whether or not the project can be completed
within the budget accessible. Such as in the Bentley motors, they estimate future cost in
an effective manner by help of different kinds of budgets.
 Set guidelines- The project budget helps to set the main goals of the research. A proposal
may not have been finished on schedule without proper budgeting (Bouwman, Nikou and
de Reuver, 2019). It helps the project manager to realize how much he should invest on
every part of the project. In the aspect of Bentley motors, they set guidelines for their
works in accordance of need of business and as per the budgeted activities.
 Track spending variances- Small business owners also monitor expenditure variances by
budget use. Although most financial planning activities are conducted on a yearly basis,
expenditure variation reporting is usually performed on a regular basis. A monthly budget
variability review helps smaller companies recognize where money gets wasted on even a
monthly basis comparison to the number of sales generated on the financial reports.
Increased deviations may require businesses to fully review their expenditure process to
ensure that they have effectively managed any funding requirements. In Bentley motors,
their financial managers track difference between actual and estimated outcomes in order
to find out positive and negative variances.
Limitations:
 Inaccuracy- The budget is based on a set of presumptions which are usually not too
detached from the operation condition in which it was constructed. If the business
requirements change significantly, the profits or cost process of the organization may
alter so drastically that the actual outcomes will quickly deviate from the guidelines laid

out in the spending plan (Munjal, Requejo and Kundu, 2019). This situation is a genuine
issue when there is a sudden economic crisis, as the finances allow for a certain level of
expenditure that is no longer be eligible under a suddenly reduced amount of profitability.
In the Bentley motors, their financial managers face this issue due to inaccurate
assumption and projection of financial data.
 Time Required-It can be very time-consuming to set up the budget, particularly in a
loosely structured setting where several iterations of the spending plan might be required.
The period required is smaller because a well-designed budgeting system is in operation,
staff is adjusted to the plan and the organization employs budgeting tools. The manager
of Bentley motors, face this issue as preparation of budget consumes too much time.
 Expense allocation-The budget may allow for the distribution of some quantities of
operating expenses to specific agencies, and administrators of certain divisions may
challenge the mechanisms of distribution used (Shefrin, 2020). This becomes a major
concern because divisions are not permitted to replace resources offered within the
organization with lower-cost programs that are accessible elsewhere.
3. Appraise the role of activity based approaches and strategic management accounting in
analyzing the decision.
Activity based approach- Activity-based costing is a costing technique that recognizes the
operations of the project and allocates the duration of each product to all product lines and
services that are produced usage of each (Ying, Ahmad and Banister, 2019). This method links
more administrative costs to actual costs relative to traditional costs. In Bentley motors, they
implement this strategy in order to allocate expenses for each individual activity in an effective
manner. This approach has below mentioned roles that are as follows:
 Recognize cost objects- The cost objects of any institution are the products and services
and the aim is first to determine the total cost of production and distribution of these
product lines and their cost per unit (Güvenç Paltun and Kaski, 2019). Such as in the
Bentley motors, they identify cost objects in an effective manner by help of this activity

based costing method. As well as on the basis of it, they take crucial decisions which
leads to better competitive edge.
 Identify different activities within organization- After the definition of the expense items,
the key tasks carried out in the company must be identified. Typically, the amount of
operations around cost centers in ABC would be far higher than the conventional
overhead method. The precise amount would focus on how the board subdivides the
operations of the organizations. Such as in the above Bentley Motors, they recognize
various kinds of activities by help of ABC costing method which becomes a basis for
better decision making in future time period.
 Recognize direct cost of products- The total cost of products or items may involve direct
material costs, direct labor costs and other costs (Purwanto, Asbari and budi Santoso,
2019). This is reasonable to identify as much of the overall costs as direct costs as
reasonably feasible. It decreases the sum of expenses that are listed as indirect. Such as in
the Bentley motors, they become able to find out direct cost of products in an effective
manner as by help of activity based costing, finance manager provides detailed
information about cost of each activity in a detailed manner.
 Relates of overheads with different kinds of activities- Once the actions of the institutions
have been identified, the various overhead items are linked to both assistance and
production factors that have caused them (Rhodes and Rebar, 2019). As a consequence of
the linkage of overhead products to different activities, an expense pool or an expense
bucket is formed. In the context of Bentley motors, they relate overall expenses with
various kinds of activities that helps in taking crucial decision making for various kinds
of other operations and functions.
Strategic management accounting-The Strategic management accounting can be defined as
provision and evaluation of current data on the company's product economies and the costs as
well as market structure of competing companies, and tracking of the business management as
well as those of its competing companies in those marketplaces over a number of time periods.
Strategic analysis utilizes accounting to prepare and evaluate (Cescon, Costantini and Grassetti,

2019). Efficient goals are defined in terms of measurable data, and sound bookkeeping is
extremely valuable in assessing as to if the company meets these strategic goals and, if not, how
far away users are from the target. It is more helpful to design that the corporation will boost its
sales of specific item by 20% over the next year than to say that it will massively improve its
total overall sales. In the context of above Bentley Motors, they imply this accounting that plays
a key role such as:
Role of strategic management accounting:
Using strategic management accounting to create cost leadership and strong economic
predictions can help organizations develop their market share in the market place. Firms may
also be able to develop a distinct competitive advantage over competitors in their company or
sector. This benefit ensures further income for the corporation and the ability to extend its
activities or to reach new business markets (Laisasikorn and Rompho, 2019). Strategic
management accounting will also decide if a corporation has to eliminate other business lines in
order to increase its income margin and reduce unnecessary activities. Such as in the Bentley
motors, they take benefits of above accounting in order to take crucial decisions for various kinds
of aspects. This form of accounting enables them to take corrective actions regards to different
kinds of activities and operations. Along with companies use their financial resources in more
efficient way to make proper utilization of available financial resources.
4. Assess the potential for and use of best-in-class benchmarking to support the decision process.
Benchmarking- Combined with the emergence of new technologies, the growing
characteristics of the corporate environment allows for the establishment of new methods and
tools within the benchmarking idea. Although significant improvement has been achieved in
extending the reach of benchmarking to cover processes and methods, the requirement for a
system-wide operational strategy remains more than ever (Harb and Ahmed, 2019).
Benchmarking is the practice of trying to compare the business operations and performance
indicators with other firms' measures how efficient and industry standards. Usually measured
aspects are of quality, time, and cost. Benchmarking is being used to measure progress by means

of a special indicator (cost per unit of measurement, efficiency per unit of measurement, setup
times of x for every unit of measurement or deformities per unit of measurement) resulting in a
performance measure which is then especially in comparison to others. In the context of above
Bentley Motors, this approach is being used in order to make proper evaluation of their financial
performance. Herein, below role of benchmarking is mentioned in such manner-
 Monitor performance- Benchmarking means looking at existing data patterns and
predicting potential developments similar to what companies plan to accomplish.
Benchmarking needs to be a constant cycle to realize companies’ been effective (Holm,
2019). Quality control is an intrinsic feature of this. In the aspect of above Bentley
Motors, they can measure overall performance of various aspects by help of
benchmarking method.
 Helps in planning and goal setting- Once benchmarking is done, targets and performance
indicators are set to boost efficiency. These objectives are new, more competitor goals for
a business but they have to be attainable. If goals to accomplish team members are
unreasonable becomes discouraged and objectives are fated to remain unmet. Such as in
the context of above Bentley Motors, benchmarking technique can be used in order to
make proper planning and goal setting.
 Encourage ownership- When companies are looking at their procedures and
methodologies, to get all the responses they need, they have to ask tough questions. That
involves communicating and discussing their positions with everybody in the company.
Through posing these queries and having a better understanding of the position of both,
process control and success are promoted. This means the employees are taking pride in
work and the work they do. This selfishness leads to better performance, and final
product of greater quality.
 Helps in continuous improvement- Continued growth is an important element of
benchmark tests, in addition to monitoring performance (Sroufe and Gopalakrishna-
Remani 2019). That's because benchmarking is aimed at improving the certain
component of a company. Such progress would not only occur once and is lost, but will
still improve over time and remain constant. Like in the context of above Bentley Motors,

they can enhance their overall performance in an effective manner by help of proper
benchmarking testing.
 Labor trends- Provides comparable data about the average type of service facts and
figures that highlight the time people usually stay in a specified country or region in only
certain job roles. This data may be sorted by gender or age to indicate duration of
operation. Due to which, it becomes easier for companies to assess current labor trend
and various kinds of other factors of business environment.
 Helps in cost comparison and distribution- Comprehensive estimates of net expense of
different country-specific employment positions, covering not only salaries, but taxation
and benefits (Hendrycks and Dietterich, 2019). This provides a much more detailed
description of the true cost of payroll and jobs, and how it varies internationally. By help
of this, the finance department of above Bentley Motors, takes accurate steps regards to
allocation of available financial resources.
5. Appraise the role of treasury management in supporting the decision.
Treasury management- Treasury management involves control of the assets of an
organization, with the overall goal of controlling the competitiveness of the company and
minimizing its economic, financial and reputational harm. It encompasses the transactions,
disbursements, focus, procurement and finance operations of a company (Monteiro, Soares and
Rua, 2019). In other words, this is characterized as 'the company managing of all economic
affairs, the century of business and working funds, currency and cash flow and the complex
corporate finance methods, practices and processes. Treasury control entails trying to control
company resources, with the total aim of determining the firm’s competitiveness and reducing its
reputational and financial long term damage. Treasury administration covers a corporation's
transfers, payments, focus, logistics and financing activities. Treasury managers try to limit
losses by embracing transfer risk and transfer protocols in keeping with the company's inner
policies. Possibilities, futures and swap are some of the major intangible assets, which are used
by Treasury management teams to backstop their risks. In the context of above Bentley Motors,
it contributes in such manner that is as follows:

 Boost in productivity- A treasury management system succeeds in simplifying work
procedures and tedious information management activities, enhancing clients main focus
productivity. Automated commencement of permission and fee removes the organization
inefficiencies and enables less dependence on the location. As in the above company,
their productivity is being enhanced by help of this treasury management. It becomes
possible only because of effective usage of available financial and non-financial assets of
a company.
 Helps in funding management- Management of the funds is the supervision and strategic
planning of the working capital of a finance company (Carnovale, Rogers and Yeniyurt,
2019). The fund manager needs to ensure that the deposit commitment timetables align
with the loans. To do so, the management team examines both the obligations and the
resources that impact the ability of banks to issue loans. It helps with the short, medium
and long-term raise funds of the planning and sourcing firms. Treasury management
helps in the decision-making phase of capital structuring, forecasts of potential currency
and interest prices, i.e., handling foreign exchange uncertainties, in line with the business
strategy. In the context of above Bentley Motors, their financial resources are being
managed in effective manner only because of treasury management.
 Cash management- Cash management consists of a broad financial area that includes the
collection, handling, and use of cash. It includes an assessment of market value, cash
balance, and spending. In accounting, cash control, or treasury management, is a brand
word for certain cash flow-related facilities that are mainly provided to larger company
clients. It could be used to define all savings accounts supplied to business owners from a
certain size (such as checking accounts), but is more often used to create particular
service providers such as cash density, zero balance financial reporting, and trying to
clear residence facilities. Cash management services are occasionally provided to retail
banking clients (Aguinis, 2019).
TASK 6

6.1.1 Difference between profit and cash.
Profit is defined as a net income which is earned at the end of a financial year. While
cash is a term or money which is used in physical form of a particular currency (Boeri, 2019).
The difference between both aspects is that profit is generated by deducting expenses from
earned sales revenue (Vecchiato, 2019). While cash is generated by making transactions in
which money is transferred in the consideration of transfer of goods. Another difference is that
profit cannot be seen, it can be understood. On the other hands, cash is a physical item which
can be seen.
Both cash and profit play a key role in the context of decision making. This is so because on the
basis of profit level, companies’ managers take key decisions about business expansion. Such as
if a company is unable to produce higher revenues in a particular year then they should not take
decision for any kinds of long term investment (Fernandez-Perez, Fuerte and Miffre, 2019).
Along with profit, cash is also a key aspect for decision making because if cash is lower, then
firms’ liquidity position becomes poor. In this condition, companies cannot think about long
term decisions. So as per the above discussion, it can be inferred that both profit and cash are key
terms which need to be considered by companies before taking any kind of decision.
6.1.2 Calculation of NPV, ARR and payback period.
In the context of above Bentley Motors, investment decision is taken out by making proper
analysis of proposal by using different methods and approaches. As per the above information,
the strategic decision is based on investment in new technology which is regarding to purchasing
new machinery. In order to choose an appropriate option there are a range of techniques such as:
Investment- 500000
Net present value:
Net cash flow (On the basis of assumption):
Year Cash flow (In $)
1 200000

2 260000
3 295000
4 340000
5 365000
6 395000
7 485000
8 510000
9 550000
10 580000
Initial investment- $ 500000
Discounted factor- 2%
So NPV of project will be as follows:
Year Cash flow (In $) PV factor Discounted cash flow
1 200000 0.9804 196080
2 260000 0.9612 249912
3 295000 0.9423 277978.5
4 340000 0.9238 314092

5 365000 0.9057 330580.5
6 395000 0.888 350760
7 485000 0.8706 422241
8 510000 0.8535 435285
9 550000 0.8368 460240
10 580000 0.8203 475774
3512943
Net present value- Discounted cash flow – Initial investment
= 3512943 – 500000
= $ 3012943
Payback period method- year before recovery + Amount to be recovered / next year cash flow
Year Cash flow (In $) Cumulative cash flow
1 200000 200000
2 260000 460000
3 295000 755000
4 340000 1095000

5 365000 1460000
6 395000 1855000
7 485000 2340000
8 510000 2850000
9 550000 3400000
10 580000 3980000
= 2 + 40000 / 295000
= 2.13 years
Accounting rate of return: Average profit / Investment * 100
Year Cash flow (In $)
1 200000
2 260000
3 295000
4 340000
5 365000
6 395000

7 485000
8 510000
9 550000
10 580000
Total profit: 3980000
Average profit: Total profit / number of years
= 3980000 / 10
= 398000
ARR: 398000 / 500000*100
= 79.6%
Analysis- As per the above analysis, this can be stated that Bentley Motors should make
investment in new machinery. It is so because, all techniques of investment appraisal are
showing positive outcome.
6.1.3 Advantages and disadvantages of different investment appraisal methods.
Payback period:
Advantages- This method's main benefit is its flexibility and absence of difficulty. To measure
average time period on a project it does not require any special details as well as experience of
accountant (Sillanpää, 2019).
Disadvantages- This does not include all-year cash flows like if spending costs covered in half of
the overall years then cash flows that left are neglected which is not a good thing.

Net present value:
Advantages- This approach takes into consideration certain main variables such as time worth of
money and makes it simpler for users to figure out the exact outcome of a project assessment.
Disadvantages- It is a complicated approach since it assesses the necessary rate of return and
because of that users have to make assumptions (de Frutos Cachorro, Willeghems and Buysse,
2019).
Accounting rate of return:
Advantages- Similar to the payback period process, this system is simple to use and everyone
inside the company may measure ARR by applying formula.
Disadvantages-All investment evaluation approaches involve cash flow in a project's feasibility
assessment process. Though cash flows are overlooked in the ARR and accounting earnings are
included that are not sufficient for proper assessment.
6.3.1 Suitability of a strategic investment in terms of strategic fit and exploiting core
competences.
In terms of an investor's desire and capacity (personal circumstances) to take on a certain amount
of risk, a suitable investment is described as one acceptable. Users have to follow each of these
requirements. It's not enough to say that an investor is risk-friendly if a project is to be suitable
(Yıldız and Tüysüz, 2019). He or she also needs to be in a financial position to take
opportunities. The essence of the threats and potential implications should also be known.
Another way to look at suitability is that it relates to investments that somebody just doesn't
want. It's doubtful, for instance, that anyone on the verge of retirement will get their whole
portfolio wrapped up in the derivatives sector. Nonetheless, the same investor might be willing to
keep 50 percent of their investments in traditional equities, but that might be too costly for those

about to age, by which point an investment of about 25 percent equity is usually deemed more
suitable (Dincer, Yüksel and Martinez, 2019).
In regards to financial investments, decisions need to be taken in accordance of proper analysis.
This can be done in accordance of investment appraisal methods such as NPV, ARR etc.
6.2.1 Assessing the cost of Equity and cost of Debt:
Here, Capital Asset Pricing Method (CAPM) is used to assess required rate of return (Re).
Formula for this is:
Cost of Equity = Risk-Free Rate of Return (Rf) + Beta of Asset * (Expected Return of Market -
Risk-Free Rate of Return)
a). 10-Year Treasury Constant Maturity Rate is used here as risk-free rate. This rate changes or
shift daily. Present risk-free rate is around 0.86000000%.
b). Herein, Beta is sensitivity in expected above asset returns to expected excess market returns.
For Bentley, beta is around 1.03.
c). (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium.
Assume market premium to be 6%.
Cost of Equity would be 0.86000000% + 1.03 * 6% = 7.04%
Cost of Debt: Year ending 2019 Interest Expense divided by recent 2-year average debt is
applied here to derive simplified cost of debts.
In Jun. 2019, Bentley's interest expense are AUD 0.008 Million. Company's overall Book Value
of Debt is 0 Million. Thus, Cost of Debt would be nil.
6.2.2 Computation of weighted average cost of capital:
Weights: Corporation's assets are mainly financed by equity funds and debts. Here thus require
to assess the weights of debt and equity:
Here market value of company's equity is regarded as Market-Cap, As on 1st July market cap of
company is AUD 2.436 Million.

Further here books value of debt is considered for computation. This is streamlined by putting
together current Shorter Term Debts & Capital Lease Obligations and Longer Term Debts &
Capital Leases Obligations average of two years. As of December 2019, the recent two-year
average shorter-Term Debts & Capital Lease liability for Bentley Capital is 0 Million and the
recent two-year average Longer-Term Debts & Capital-Lease liability is 0 Million. Overall Book
Debt Value is 0 Million.
a) Weight of Total Equity = E / (E + D) = 2.436 / (2.436 + 0) = 1
b) Weight of Total Debts = D / (E + D) = 0 / (2.436} + 0) = 0
WACC = E / (E + D) * Cost of Equity + D / (E + D) * Cost of Debt * (1 - Tax Rate)
= 1 * 7.04% + 0 * % * (1 – 0%)
= 7.04%
As naming itself indicates the Capital Asset Pricing Model is normally used with given risk to
price a security. This framework explains the connection in investing protection between
anticipated return & risks.
Benefits: CAPM takes into consideration market instability that is omitted from other return
formulas, for example the concept of dividend discounts. Systematic risks, often regarded as
market threat, are significant as they are unanticipated and sometimes could not be counteracted
because they are not fully planned.
Limitation: Far more assumptions that many condemn as unreasonable are the basis of CAPM
model. Consequently, the appropriate findings cannot be given. The issue may be with the usage
of the CAPM for determining a discount rate for a particular project. For addition, index and
fund equity / risk portfolios vary (Balliauw, Kort and Zhang, 2019). The corporation must thus
the locate project proxy beta.
WACC: WACC is internal capital cost measure, which may either be measured on market
base or on book value base. This approach consider Debt and Equity weighs to find out the worth
of company.

Benefit: This is its versatility that is most advantageous to use WACC as a guideline to test
proposed initiatives. There is not so much uncertainty in the measurement. The boss simply has
to use weights and the outcomes of every source financing (Bapna, 2019).
Limitation: The debt / equity level will tend to increase and WACC will also adjust. WACC is
considered to be compatible with the company's expected valuation and ensures that its debt-to -
equity ratio stays stable and unlikely. WACC is supposed to maintain constant debt-to - equity
proportion.
6.3.2 Acceptability and feasibility of a strategic investment against performance criteria,
stakeholders’ expectations and strategic capability.
The acceptability and feasibility of a strategic investment depends on a range of factors
that needs to be consider. Below feasibility and acceptability of a decision are mentioned in such
manner:
Performance criteria- The performance criteria for accepting an investment depends on various
kinds of aspect such as level of return in future. As well as risk. Like in the above company, they
have to consider the investment in accordance of performance criteria that are mentioned.
Stakeholders’ expectations- In addition, stakeholders’ expectations also need to match. Such as if
stakeholders want the higher return on the invested amount then this is essential for company to
maintain higher efficiency of an investment (Rao, 2019).
Strategic capability- Strategic ability evaluation is a dynamic method, partially due to the amount
of considerations it may tackle. The method of determining competitive potential of a company
is recognized as an appraisal of strategic interest. It depends on data from financial reports,
national polls and consumer dynamics to assess growing businesses in a given sector are missing
strategic capabilities. When organizations adapt and gain additional capital, analysts will
constantly conduct new analyzes of strategic interest.
6.3.3 Analysis of quantitative and qualitative issues of strategic proposals.

A strategic proposal can have both kinds of issues including quantitative and qualitative
issues. It depends on companies that how well they are managing their issues in order to satisfy
need of their competitors (Del Castillo and Dimitrakopoulos, 2019). Below some issues are
mentioned that are as follows:
Quantitative issues:
 Financial project may produce negative outcome in upcoming time period due to change
in financial environment.
 Variation in interest rates may lead to different kinds of conflicts and issues. Due to this,
project can be affected negatively.
Qualitative issues:
 In addition, an investment project may have qualitative issues also such as conflict
between objectives of investors and company.
 Lack of coordination also may lead to different kinds of issues for a project or
investment. Thus, it is essential to companies to make proper communication with
different stakeholders and their interest (Luo, 2019).
So these are some qualitative and quantitative issues which may occur in regards to any
investment project.
CONCLUSION
On the basis of above project report this can be concluded that financial resources and
performance management is too crucial for business entities. It is so because on the basis of these
aspects companies take corrective decisions. The report articulates about different kinds of tasks
such as impact of organizational decisions on financial decisions. Along with importance and
limitation of budgeting approach is also mentioned in the report. In addition, role of
benchmarking for better decision making is also concluded in the project report. From the end

part of report, this can be concluded that treasury management plays a key role for better
financial decision making that leads to better usage of available financial resources.

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