Managing Financial Resources and Decisions- PDF

Added on - 03 Dec 2019

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Managing Financial Resources anddecisions
Table of ContentsIntroduction................................................................................................................................1TASK 1......................................................................................................................................1AC 1.1 Different sources of finance.................................................................................1AC 1.2 Legal, Financial and dilution of control implication and bankruptcy risks..........1AC 1.3 Appropriate source of finance..............................................................................2AC 2.1 Cost of various sources shown in Income statement and Balance sheet..............2TASK 2......................................................................................................................................3AC 2.2 Importance of financial planning.........................................................................3AC 2.3 Information needs of various decision makers.....................................................4Task 3.........................................................................................................................................4AC 3.1 Cash Budget for Four months..............................................................................4AC 3.2 Calculation of selling price and profit..................................................................5AC 3.3 Implication of investment appraisal techniques...................................................6TASK 4......................................................................................................................................8AC 4.1 Financial statement of the company.....................................................................8AC 4.2 Appropriate formats of financial statements:.......................................................8AC 4.3 Interpretation of financial statements by calculating various ratios.....................9CONCLUSION........................................................................................................................10REFERENCES.........................................................................................................................121|P a g e
List of tablesTable 1: Cash budget for Health Limited...................................................................................4Table 2: Profit earned with 500 units.........................................................................................5Table 3: Profit for additional 1000 units....................................................................................6Table 4: Net present value..........................................................................................................6Table 5: Cumulative cash flow..................................................................................................72|P a g e
INTRODUCTIONEvery Business is concerned with production and distribution of goods and services tosatisfy their customer needs. Hence, for carrying out various businesses activity organizationrequires money. Therefore, finance is also called the life blood of business. A business cannotoperate well without adequate funds. Initial capital invested by entrepreneur is not alwayssufficient to meet financial requirements (Peirson, & et. al., 2014). So, the organization has tolook for other sources from where the need for funds can be met. A clear assessment offinancial needs and the identification of various source of finance is significant aspect forrunning a business organization. In the presented report, we will identify different type ofinternal and external source of finance along with the cost factor and also the appropriatesource of finance for Green Supplies Ltd. in addition to it, we apply different investmentappraisal techniques for various proposals and also selling price will be decided using costbased pricing method.TASK 1AC 1.1 Different sources of financeRetained earnings:It is an internal source of finance available for Green Supplies Ltd.It means reinvestment of profit to earn further return. It can provide return forinvestors byploughing back of the earningsand also help business to grow.Cash Squeezed: It means that organizations will pay their bills later and receive itscash earlier from the customers.This internal source of finance provides huge boost to cashflow to Green Supplies Ltd.Sale of assets:Disposable assets such as plant and machinery, furniture and land canbe sold out to get financial sources for Green Supplies Ltd (Chandra, 2011). It is also aninternal source which fulfils the temporary requirement of finance.Loan Capital:The most common way of loan capital is borrowing from bank. It is anexternal source of finance available for Green Supplies Ltd. It can be either in the form ofbank overdraft or bank loan. Overdraftfulfils the short term requirement of companies to alimited extent. Whereas, loan may be for short term or long term period based on the businessrequirement.Share capital:It is an internal source of finance as Green Supplies Ltd. can raise itfunds by issuing additional shares (Hayre, 2013). Venture capital providers are interested ininvesting in businesses with dynamic growth prospectus.3|P a g e
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