Financial Planning and Sources of Finance for Radisson Plc

MFRD

Table of Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
A..............................................................................................................................................................3
B..............................................................................................................................................................6
TASK 2..........................................................................................................................................................7
A..............................................................................................................................................................7
B..............................................................................................................................................................7
C..............................................................................................................................................................9
TASK 3........................................................................................................................................................10
A............................................................................................................................................................10
B............................................................................................................................................................12
C............................................................................................................................................................12
TASK 4........................................................................................................................................................14
A............................................................................................................................................................14
B............................................................................................................................................................16
CONCLUSION.............................................................................................................................................17
REFERENCES..............................................................................................................................................19

INTRODUCTION
Financial planning refers to the process of procurement, utilization and proper
management of money to control overspending, meet capital as well as daily business need,
maintain cash surplus and so on. Every company involves in such activities may be either to start
a new business or expand existing business in new markets. This assignment will guide an
individual about various ways through which they can gather money to meet out their financial
commitments. Moreover, the report will also highlight the key differences among all the sources
on the basis of legal, financial, dilution, and bankruptcy implications to identify the best source
of money. Along with this, report will guide about various managerial techniques that how
money can be managed properly through financial planning and cash budgeting. Apart from this,
sometimes, businesses require huge amount of funds to pay capital expenditures like to buy
property, machinery and equipments. It can drive both the risks and return to the entity,
henceforth, companies have to identify the project that will yield better return. In order to fulfill
that objective, project evaluation techniques will be considered best as it examine both the risk
inherited and possibility of return so as to determine the most profitable and beneficial project.
At the closure of the report, it will analyze differences in the financial reporting requirement of
different organizations i.e. sole trader, partnership and company.
TASK 1
A
In order to finance long-term contract, Radisson Plc can choose any of the below
mentioned sources or combination of one or more financial source depending upon the time
period and amount of money. It can be categorized into three parts, that are explained hereunder:
Traditional financial sources:
Retained profits: Sum of profits that not had been reinvested or distributed among
shareholders by Radisson Plc is called retained or residual yield (Broadbent and Cullen 2012). It
can be used by the company to meet out their capital need for the contract without any legal
obligation and financial cost.

Ownership capital: It refers to the money invested by shareholders and can be used for
large expenditures, new product development, setting new plant and business expansion. In such
regards, listed companies can opt for either right issue or deferred ordinary shares to raise
money, whereas unquoted companies can issue shares over the counter market. There are two
options available to Raddison Plc, one is issuance of ordinary shares and second is preference
shares. Out of these, ordinary investors have right to vote and share company’s profits, however,
preference share holders are just entitled to get a fixed rate of dividend.
Non-ownership capital:
Bank loan: Radisson Plc can typically borrow money from the lenders and meet their
financial commitments. In this, money can be raised at a predetermined interest rate along with a
fixed schedule of repayment.
Hire purchase: It allows business unit to use an asset in regular operations without the
requirement of paying complete buying price at the point of purchase. It is because; company
just need to pay some amount of money as initial or down payment and remainder can be paid in
equal periodical instalments.
Factoring: Radisson Plc can discount their outstanding invoices to raise money, generally
used to resolve the financial difficulties of cash shortage. In this, factoring company charges
some interest and repays remaining balance that is generally equal to 85% of the total invoice
amount.
Implications of financial sources:
Source Legal Financial Control transfer Bankruptcy
Retained profit No legal
obligations
exists.
No financil cost
involved in
utilizing profits.
Ownership rights
are available to
shareholders
only.
No bankruptcy.
Owners capital Following stock
exchange
regulations and
Dividend to the
shareholders to
fulfill their return
Equity or
ordinary
shareholders
Owners have
liability to repay
capital to the