Financial Strategy and Policy

FINANCIAL STRATEGY
AND POLICY

Contents
INTRODUCTION...........................................................................................................................1
SECTION - A..................................................................................................................................1
Cash Budget............................................................................................................................1
SECTION – B..................................................................................................................................2
a) Important features of each of the three proposed financing options..................................2
b) Suitability of proposed financing option............................................................................6
SECTION – C..................................................................................................................................6
SECTION – D..................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Company's fiscal strategies and plans are mainly associated with collecting and using financial
resources (Vaubourg, 2016). The fundamental role of strategies and policies is to ensure that the
company receives sufficient and frequent funding, taking into account the present and future
operational needs. Four major sections are defined in this context first section is about the cash
budget of six months, second section is about the practical problem about capital financing in
order to evaluate the suitable financing option for business. Third section is about the evaluation
of cost of capital. Section D extract the concept of overseas operations for a manufacturing and
sales organisation.
SECTION - A
Cash Budget
A financial forecast is a schedule or project for the duration of anticipated cash collections and
payments. In certain phrases, a cash budget is also an approximately extrapolation of both the
cash balance of both the company and whether the activities of the company as well as other
events provides adequate cash to fulfil the predicted cash criteria and if it is, the board will have
to find extra funding sources. Other cash outflows and inflows comprise earned taxes, costs paid,
refunds and fees for loans (Steckel and et. al., 2017).
Seine products Ltd. Is one of the manufacturing business started production on 1 January
and sales planned to start in February. The projected cash budget is prepared considering all the
transactions and amendments.
SALES UNITS
Jan
Amount
in (£)
Feb
Amount
in (£)
Mar
Amount
in (£)
Apr
Amount
in (£)
May
Amount
in (£)
Jun
Amount
in (£)
Total Sales Units 400 500 600 700 800
Receipts 40000 50000 60000 70000 80000
Actual Income
Received Cash/Same Month 19600 24500 29400 34300 39200
Received Cash in the following
Month 19000 23750 28500 33250
Cash received from Issue of 300000 - - - - -
1

shares
TOTAL INCOME 300000 19600 43500 53150 62800 72450
Payments
Payment made to raw material
suppliers -16000 -20000 -24000 -28000
Direct labour -8000 -10000 -12000 -14000 -16000
Production overheads -17000 -17000 -17000 -17000 -17000
Non-production overheads -10000 -10000 -10000 -10000 -10000
Purchase of fixed assets -250000 - - - - -
opening cash balance - 50000 34600 25100 19250 17050
Closing cash balance 50000 34600 25100 19250 17050 18500
Workings
Feb Mar Apr
Payment received from
debtors in the same month
(40000 * 50%) -
(40000*50%) * 2%
(50000 * 50%) -
(50000*50%) * 2%
(60000 * 50%) -
(60000*50%) * 2%
Received Cash in the follow-
ing Month -
(40000 * 50%) *
95%
(50000 * 50%) *
95%
May Jun
Payment received from debtors in the
same month
(70000 * 50%) -
(70000*50%) * 2%
(80000 * 50%) -
(80000*50%) * 2%
Received Cash in the following Month (60000 * 50%) * 95% (70000 * 50%) * 95%
SECTION – B
a) Important features of each of the three proposed financing options
Current position
Amount in (£m)
Operating profit 110
Interest -20
2