Report on Managing Financial Resources

   

Added on  2019-12-17

17 Pages4006 Words144 Views
MANAGING FINANCIALRESOURCES AND DECISIONS
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INTRODUCTIONFinancial management is considered as an efficient as well as effective management ofthe funds in a way that it can result in attainment of organizational targets to a greater extent. It isspecialized function directly attached with the higher level authority (Brigham and Ehrhardt,2013). The executive of the business take wide range of decisions in order to grow and succeedfor longer course of time. The present report on managing financial resources has been discussedin context of medium sized organization. The study entails to understand the sources of financethat are available to the business. Along with this it includes financial decision making on thebasis of financial information. TASK 11.1 Identification of sources of finance available to businessInternally the funds the would be gathered by the means of operating activities. It assist inmitigating the needs for short term and long term requirement for funds. Such have beenenumerated in the manner stated as under: Personal saving: The business can make investment of its own savings to a significantlevel as such this is available at much cheaper rate. This is due to the reason that entity isnot required to make payment of the financial in using amount of personal saving. Loan from bank: Fashion outlet can take loan from bank in order to satisfy its long termrequirements (Hill and et.al., 2013). Interest is being charged by the financial institutionagainst this and also the organization needs to keep certain asset as security with thebank. Hire purchase: Under this the fashion outlet can acquire assets by making payment ofcertain amount as down payment. Later after the payment of last installments thepossession of the product would transfer to the business. Leasing: There is presence of certain equipments that are high priced. In situation ofestablishing new fashion outlet the business can lease the asset for certain period of time.For this it can make payment of rent to the leasing firm. 3
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1.2 Assessing implications of different sources of finance determinedThe implications of the financial sources that have been determined is enumerated in themanner stated as under: Personal savings: It is being assessed that there is absence of financial implications.Along with this there are no legal implications. Here, the control would be in the hand ofthe owner. No bankruptcy as the amount used is not required to be repaid. Leasing: It can be described as the rent payment for the use of asset is the financialobligation. In case the payment of rent is done on time then leasing company can takelegal action against the organization. No dilution of control prevails under this. Furtherthere is absence of bankruptcy. Bank loan: Payment of the interest is considered as the financial implication. In situationdelay is made towards making payment of the interest in bank loan then legal actions canbe taken by the bank (Brigham and Houston, 2012). This would lead to affecting thecredit rating of the organization. There is no dilution of control in case of bank loan. Incase the amount is not paid on time by the organization then its assets can be seized.Further in situation the amount is not recovered through asset the bank can declarecompany as bankrupt. Hire purchase: The liability towards payment of interest is the financial obligation underthis. In case organization does not make payment of installments on time then asset canbe taken back by the firm. There is no dilution of control. Firm is required to pay thevendor in situation of bankruptcy (Oikonomou, Brooks and Pavelin, 2012) 1.3 Evaluation of appropriate sources of financeThere are various kind of financial resources which the business can use in order to fulfillits short term as well as long run requirements for funds. The evaluation of the appropriatefinancial sources has been enumerated in the manner stated as below:Loan from bank: It is considered as one the suitable financial source that can be used foraccomplishing the long terms needs of the organization. Loan can be repaid withinspecified duration of time. Moreover the payment of interest is allowable expenditure fortaxes. Thus it offers tax benefits to the firm (Brigham and Daves, 2012). However it hasmajor disadvantage in terms that it requires firm to keep certain assets as security. 4
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