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Managing financial resources and decisions

   

Added on  2020-01-28

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Managing financial resourcesand decisions

Table of ContentsINTRODUCTION...........................................................................................................................................3TASK 1..........................................................................................................................................................31.1 Identify the sources of finance...........................................................................................................31.2 Assess the implications of sources of finance....................................................................................31.3 Evaluate the sources of finance..........................................................................................................4TASK 2..........................................................................................................................................................42.1Analyse the cost of sources of finance................................................................................................42.2 Explain the importance of financial planning....................................................................................52.3 Assess the information needs of users of finance...............................................................................52.4 Impact of finance on financial statements..........................................................................................6TASK 3..........................................................................................................................................................73.1 Prepare cash budget and analyze......................................................................................................73.2 Calculation per unit and pricing decision...........................................................................................93.3 Assess the viability of projects........................................................................................................10TASK 4........................................................................................................................................................134.1 Explain different financial statements format..................................................................................134.2 Compare different formats of financial statements with different organization structure................144.3 Interpretations of ratios....................................................................................................................16CONCLUSION.............................................................................................................................................19REFERENCES..............................................................................................................................................19

INTRODUCTIONRole of finance has increases which act as a fortune teller who identifies financial crisisincurred in the future to rectify the deficiency of the business. Clariton Antique Ltd has beenselected in this report in explaining the importance of finance. This focuses on selecting financeand assessed on various parameters. The cost of finance are assessed which further help inselection of the best suitable sources of finance. Capital budgeting tools and ratio analysis areapplied by an entity in assessing viability of the business proposals.TASK 11.1 Identify the sources of financeUnincorporated users- The players of the business who have no legal identity in the eyes of lawas are not registered under the law (Kaplan and Atkinson, 2015). The companies who have not registered in the companies act are not abiding by their rules and regulations.Retained earnings-The commonly use internal source of finance which is personal property of an individual. This amount generated after giving dividends out of the total profit earned by an individual. This is often represents as secret profit kept by the owner as savings in form of reserves to meet uncertainty. The current reserve will help in improving the efficiency of the existing business.Owner’s capital- Savings of an individual are used in meeting the funding requirement of the business. The capital infused by the owner in their current business will generate minimum return for all the business players. The efficiency of enterprises will get increases when the investment has increases by applying their own resources in their business.Incorporated business- The business which has registered in the companies act and other federal and state laws has legal recognition in the outside business environment. The registration of the business enterprise will provide further recognition form of public or private companies.Debt financing- Cheapest sources of finance in the business and their capital structure are debt finance. It is that kind of external sources of finance which is based on asset in which assets are given on collateral security in order to get finance.Equity cash flow- Applications are invited by sending offer to take up the shares of the business enterprise. The shares are issues in order to accomplish the business requirements in order to strengthen the existing resources.1.2 Assess the implications of sources of financeInternal sources of finance

Retained earnings-It helps in boosting the performance of an entity as this utilizes the secret profit in own business. This improves the economic growth of an enterprise in which existing resources are utilized by an entity in accomplishing their goals and the objectives. This further generated after paying taxes and dividends which remains with less amount.Owner’s capital-The possession of the money are held with an entity in order to invest the money in their business. The money can be invested by an entity according to their business nature and requirements.External sources of financeDebt financing- The initial benefit of the enjoyed by the business by using these sources of finance is that it can be taken in any quantity (Epstein and Buhovac, 2014). The obligation involved in taking these sources of finance involves interest paid on the loan by depositing collateral security with the bank or any kinds of financial institutions. This source of finance is regarded as cheapest sources of finance as it doesn’t carry long term debt obligations.Equity financing- This is another important sources of finance which helps in building appropriate capital structure of the business concern. The cash flow increases by an entity as the amount taken from all the shareholders to be kept by the owner for long term till the wound of the business. This source of finance involves payment of dividend and all other legal and agreement fees to be incurred in issuing equity shares. The maintenance of the issued shares is essential in order to maintain the existing position.1.3 Evaluate the sources of financeInternal sources of finance- The internal sources of finance will includes retained earnings and owner’s capital held by an enterprise for log term in their business. The internal capability of an individual will be improved with the passage of time as it enhances the capability of the organization.External sources- The higher obligations covered while using these kinds of financial resources which involve debt and equity financing as one of the commonly used techniques. The cost of dividend and paying interest on the amount taken will involve additionally.It can be recommended to the business to choose retained earnings as one of the important sources of finance for an enterprise.TASK 22.1Analyse the cost of sources of financeBasisVenture capitalistFinance brokerDividendsThe amount given to all the shareholders for applying their money in the business of claritonThe term dividend will not affect the business in terms of using these particular sources of

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