Financial Analysis and Recommendations for Clariton
Added on 2019-12-18
20 Pages5117 Words173 Views
Finance
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Managing Financial Resources andDecisions
ContentsIntroduction.................................................................................................................................................4Task 1..........................................................................................................................................................41.1 Sources of finance.............................................................................................................................41.2 Implications of financial sources........................................................................................................51.3 Appropriate source of finance............................................................................................................6Task 2..........................................................................................................................................................62.1 Cost of financial sources....................................................................................................................62.2 Financial planning and its significance..............................................................................................72.3 Information requires to make effective decision................................................................................82.4 Impact of financial sources on accounting statements.......................................................................9Task 3..........................................................................................................................................................93.1 Cash budget.......................................................................................................................................93.2 Unit cost and pricing decisions........................................................................................................113.3 Investment decisions........................................................................................................................12Task 4........................................................................................................................................................144.1 Key components of financial statements..........................................................................................144.2 Financial formats for sole traders and partnership firm...................................................................154.3 Comparison of financial ratios.........................................................................................................15Conclusion.................................................................................................................................................18References.................................................................................................................................................19
IntroductionFinancial management is the planning and monitoring tool through which an entity can make effective control over its monitory resources. It support in taking such decisions which can maximize the value of organizations. Management of economic activities assist in selecting effective source of finance otherwise entities can expose to higher risk. Current assignment is based on Clariton Antiques Ltd, it is an unincorporated business which is founded by four partners. Report will discuss the internal and external sources of finance and their implications on business (Herzallah, Gutiérrez-Gutiérrez and Munoz Rosas, 2014). Cost of several sources will be discussed and impact of sources will be illustrated in the study. In addition to this calculations of NPV, ARR and pay back period will be done for making investment decision. Atthe end of report financial performance of Clariton will be analyzed.Task 11.1 Sources of financeSelection of appropriate source can protect firms from suffering higher risk (Newman, Borgia and Deng, 2013). Raising money for earning higher profit is difficult task. Sufficient funds can support in running business smoothly.a)Unincorporated businessThese are commercial enterprises which are ruled by owner of partners. As such type of entities have not been granted corporate status, so owner is responsible for debts of the company. Sources of finance for such type of business are as following:Owner or partner capital: Clariton is the partnership firm, there are four partners in the organization and all of them are having equal rights in the organization (Infelise, 2014). Cited firm is aiming to raise its funds for further development for that all partners can invest their capital in the business. For increasing cash inflow they can introduce one more partner in it. As new person will also invest own capital in entity that would help in raising funds. Business loan: It is another available source of finance for unincorporated businesses, they can take support of financial institutions. Bank charges interest and grand loan to start up firms sot that they can run their operations well (Huang, Rice and Martin, 2015). b)Incorporated business
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