Managing Financial Resources and Decisions - Lilliput

Managing Financial
Resources and Decisions

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
LO 1.................................................................................................................................................1
1.1 Source of financial available in the organisation.............................................................1
1.2 Implication of different sources of finance identified......................................................2
1.3 Appropriate sources of finance for business project........................................................3
LO 2.................................................................................................................................................4
2.1 Cost of each source of finance that identified by the organisation...................................4
2.2 Importance of financial planning and give details about financial planning....................5
2.3 Information that needs for internal and external decision makers...................................5
2.4 Impact of finance on the financial statements..................................................................7
LO 3.................................................................................................................................................8
3.1 Budget analysis.................................................................................................................8
3.2 Link between cost and selling price.................................................................................9
3.3 Assessing and calculating viability of project................................................................10
TASK 2..........................................................................................................................................11
4.1 Important financial statement........................................................................................11
4.2 Types of main financial statement .................................................................................11

4.3 Ratio Analysis................................................................................................................13
CONCLUSION..............................................................................................................................17
REFERENCES................................................................................................................................1

INTRODUCTION
Financial management defines as the efficient and effective arrangement of money to
accomplish organisational objectives and goals. It is the main element which required in
significant manner that is associated with top functions and management (Franker and James,
2016). Further, it is also important for establishing financial management system through
accounting, bookkeeping and identifying investment opportunities within the market. According
to minister of cabinet office Matt Hancock small sector organisations have the largest
opportunities to work with public sector businesses. In this context, present report is based on the
Lilliput which is the small sector enterprise in UK market. Present study covers sources of
finance that are available in organisation and its implication in project. Furthermore, it also
analysis cost of each source of finance
TASK 1
LO 1
1.1 Source of financial available in the organisation
In order to make successful and smooth functions of the organisation, Lilliput required to
enhance their financial fund which is the basic elements of the business. In respect to accomplish
goals and objectives, the chosen enterprise need to generate more cash inflow within the firm
(Soria, Weiner and Lu, 2014). The selected enterprise is the small sector industry and offers
qualitative products and services to people. In order to accomplish purpose, the chosen enterprise
required to enhance their revenue through increasing sales. Various sources are explains under
here:
Bank Loan: It is the effective and easily arrangeable source of finance in Lilliput.
Financial institutions providing loans to small sector businesses at very low rates. Repayment
schedule of bank loan is also easy through monthly instalment. It is the quite affordable by small
sector organisation so that government also make support them to provide them scheme
(Reinikainen and Sorvari, 2016). This is because, small sector enterprise also create
opportunities to provide employment opportunities. In this aspect, banks also offers business
loans to expand brand in small sector organisation.
Selling of assets: It is the another type of available source for Lilliput. In this aspect, the
organisation can arrange fund through sell unusable assets and change it according to current
1

trends. This is because, it assists to meet with needs of the company that required to offers
different types of products and services that are possessed high demand (Giordano and Shah,
2014). Further, it also sale dead goods at low rates to collect amount for other expansion. Beside
this, the chosen enterprise can also sale old machinery to getting fund for expansion of the
organisation.
Personal resources: It also other source of finance in which Lilliput can use their own
fund within the enterprise. As compare to this, in this aspect risk also take place which harm to
financial position of owner (Haddow, Bullock and Coppola, 2017).
Venture capitalists: It is the best way to arrange source of finance within the
organisation. In this aspect, Lilliput can convince to investors to invest amount in the firm.
Hence, the organisation has opportunity to make effective functions and operations to increase
operations.
1.2 Implication of different sources of finance identified
In order to make implications, different sources can be determines in the following
aspects:
Source Implication in term
of economic
Implication in term
of legal
Implication in term
of ownership
Bank loan The selected enterprise
need to demonstrates
security to borrow
Legal agreement also
required in the
selected business and
Ownership always
remain same and it is
not diluted.
2
Illustration 1: Source of finance

money from banks
(Bursztyn, Ederer,
and Yuchtman, 2014).
Beside this, they also
need to pay amount on
time through monthly
payment. There is
proper documentation
required such fees,
legal documents, etc.
bank unit to repay
amount otherwise
bank can cease assets
easily.
Sales of assets However, when
Lilliput sell their
assets it can be harmed
to financial position as
well.
There is no legal
implication required to
sale of assets
(Taipaleenmäki and
Ikäheimo, 2013).
Ownership is not
diluted.
Personal source When the enterprise
fail to gain more
profits, it can be
impact on the business
financial position to
the owner.
It is the own capital of
owner so that each
individual has no need
to make legal
requirement.
Owner perceive full
control over the
organisation and
individual needs to
share ownership with
anyone.
1.3 Appropriate sources of finance for business project
Lilliput operate their functions and operations as the small sector of the UK market.
Therefore, enhancement of sales and profits of the enterprise required to expand their operations
to select appropriate source of finance through more revenue can be gain easily. With the help of
this option, the chosen firm also able to get more amount to fulfil goals and objectives (Endrikat,
Guenther and Hoppe, 2014). Beside borrowing the amount, the enterprise need to identified that
institute has quite affordable to repay loan amount on the basis of monthly payment. According
to the plan of government, interest rate for small sector enterprises quite low so that the
3