Identifying Sources of Finance Available to Business

   

Added on  2020-06-05

13 Pages2964 Words49 Views
Managing Financial Resources
Identifying Sources of Finance Available to Business_1
TABLE OF CONTENTSINTRODUCTION......................................................................................................................1TASK 1......................................................................................................................................11.1 Identifying sources of finance available to business........................................................11.2 Presenting the implication of financial sources identified...............................................21.3 Evaluating appropriate sources of finance that is suitable for business project...............32.1 Analyzing cost of different financial sources...................................................................32.2 Explaining the importance of financial planning.............................................................42.3 Assessing the information need of different decision makers.........................................42.4 Impact of sources on financial statement of the firm.......................................................43.1 Analyzing budgets for making appropriate decisions......................................................53.2 Calculation of unit cost for making pricing decisions.....................................................63.3 Evaluating the viability of projects using investment appraisal tools..............................6TASK 2......................................................................................................................................84.1 Discussing the main financial statements that are prepared by Sainsbury.......................84.2 Comparing the financial statement formats of different business units...........................84.3 Interpreting financial statements of Sainsbury through ratio analysis.............................9CONCUSION..........................................................................................................................10REFERENCES.........................................................................................................................11
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INTRODUCTION In the business unit, effective allocation, management and utilization of financialresources are highly required to meet the organizational goals or objectives. In this,considering the supported which is provided by the government authority business of Foodfor Friends is planning to open another restaurant in London for the purpose of expansion. Inthis, report will entail the sources that can be considered by business entity for fulfillingmonetary requirements. Along with this, it will provide deeper insight about the manner inwhich concepts such as financial planning, budgeting, investment and ratio analysis aid ineffective decision making.TASK 11.1 Identifying sources of finance available to businessFor opening another restaurant in London business entity requires £160000, whereasnow entrepreneur has only £20000 for the purpose of investment. In this regard, by using thefollowing sources entrepreneur can meet financial needs such as:Internal sources Personal savings In the recent times, with the motive to fulfil future need and meetingcontingent situation business entity lays emphasis on saving money.Thus, by using personal savings business entity can generate fund forimplementing business plan. Sale of unusedassets Company can also meet financial needs by selling fixed assets that arenot used recently in productive activities.External sources Government grant Now, government is offering financial assistance to the firms atconcessional rates. Hence, by presenting lucrative business plan togovernment authority entrepreneur of F&F can raise funds. Bank loan Business entity can meet monetary requirements by applying to thebanking institution for loan. Moreover, banks are usually ready to giveloan to the company on the basis of collateral security (Peirson andet.al., 2014).Leasing For making investment in fixed assets such as land & building, plantand machinery etc business entity requires high funds. In this regard,by taking assets on lease restaurant owner can meet monetary needs.
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1.2 Presenting the implication of financial sources identifiedAt the time of taking decision or making section of sources, owner of F&F shouldkeep in mind following implications:Sources offinance Legalimplications Financial Dilution ofcontrolBankruptcy Personal savingsNo Opportunity costin terms of lossof interest oncapitalNo Least priority Sales of assetsOn the basis oflegal aspect, inthis, ownershiprights are shiftedto others.Charges ofadvertisementand otherdocumentaryaspects No-Governmentgrant Need or obligedto use money inthe activities forwhich it isgranted. Interest on loan LimitedAt the time ofbankruptcy,concernedauthority enjoyspriority ingetting backamount Leasing In leasing,business entityis obliged toreturn back assetafter the specifictime frame(Kemp andet.al., 2015).Periodical rentpertaining tothe asset takenon lease Limited to theassets provided Same as aboveBank loan In the case ofdefault, bankingunit has legalright to takeaction in againstto the firm.Interest charges Limited to thefinancialassistanceoffered Likewise ingovernmentgrant andleasing 1.3 Evaluating appropriate sources of finance that is suitable for business project Out of several sources available to F&F, business entity should select belowmentioned internal and external sources as they has following advantages & disadvantages:Personal saving AdvantagesDisadvantagesFree from periodical obligations No reduction in ownership rights Loss of interest on capital employed
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