Managing Financial Resources
Added on 2020-12-18
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Managing Financial Resources and DecisionMaking
TABLE OF CONTENTSINTRODUCTION......................................................................................................................3TASK 1......................................................................................................................................3A Identifying potential sources of funding available to business unit and explaining thesignificance of financial planning..........................................................................................3B Evaluating both long and short terms sources of finance in the context of listed company................................................................................................................................................4C Analyzing cost associated with the different sources of finance........................................6D Assessing the informational needs of three stakeholders...................................................7TASK 2......................................................................................................................................8A Explaining results using NPV method...............................................................................8B Presenting solution by applying discounted and non-discounted payback method on netcash flows.............................................................................................................................10C Assessing whether Aston Ltd should continue with such capital project or not..............12TASK 3....................................................................................................................................12A Identifying and discussing the purpose of financial statements.......................................12B Presenting reasons behind the usage of different formats in the varied businessorganization..........................................................................................................................13C Assessing financial performance of Tesco Plc using main financial statement...............14CONCUSION..........................................................................................................................16REFERENCES.........................................................................................................................17
INTRODUCTIONIn the context of business unit, effective financial resource management is vital for theattainment of success at the competitive marketplace. Moreover, efficient allocation andutilization of funds ensures high growth and assists in building competitive position. Financemanager plays a crucial role in developing strategic framework regarding where funds needto be employed for maximizing both productivity and profitability. The present report isbased on different case scenarios which in turn provides deeper insight about the fundingsources that can be used by listed firm for meeting financial requirements. Further, report willshed light on the cost as well as suitability of both long and short term sources of finance.Besides this, report will entail the significance of investment appraisal techniques in thedecision making pertaining to capital project. Report also depicts the format and purposesbehind the preparation of financial statements. It also presents whether financial performanceof Tesco has improved or deteriorated over the time frame. TASK 1A Identifying potential sources of funding available to business unit and explaining thesignificance of financial planningThe above depicted case scenario presents that listed Hong Kong companies want toraise capital for the purpose of business projects. Hence, there are several sources which canbe undertaken by Hong Kong firms for meeting financial or monetary requirement.According to the views of Caselli and Negri (2018), equity share capital is recognized as themost effective sources which help in meeting financial need to the large extent. By offeringsshares to the general public at large listed companies can easily generate funds. However, onthe critical note, Chava, Livdan and Purnanandam (2018) argued that bank loan source isprominent in comparison to equity share capital. Moreover, equity share capital source limitsfreedom of business entity in the firms operations and decision making. Hence, by applyingto the financial institutions for loan business unit can fulfil its needs. The reason behind this,banks are usually ready to offer financial assistance to the growing and profitable firms.Thus, by approaching to the banks and getting funds business unit can capitalizeopportunities.
Anjarsari (2018) presented in their study that listed companies can grab theopportunities by using retained profit source of finance. For complying with the contingentsituation business units prefer to retain some amount of profit with itself rather than investingall. Hence, using such source business organization can meet funding requirements. Alan andet.al., (2018) claimed in their study that retained profit source negatively impacts firm interms of loss of shareholders faith. Thus, author identified bank overdraft as a prominentfunding source which help in meeting short term financial needs. Now, banks provide creditfacility to the firms which have maintained good image in terms of financial transactions.Neri (2014) assessed factoring as the most suitable source which assists in getting funds atlow cost. Each business unit has some receivable note. Thus, by discounting the same fromfinancial institutions business entity can easily meet financial requirements. Financial planning: It implies for the process which in turn provides framework forthe achievement of business goals and objectives. In the context of listed firms, financialplanning helps them in avoiding business shock to the great extent. Plans pertaining to themonetary aspects help firm in prioritize projects more effectually (Topa and Herrador-Alcaide, 2016). Significance of financial planningFinancial planning facilitates optimum collection of funds by avoiding wastage level.It enables listed to set highly structured or optimal capital structure.Assists in setting priorities and investing money in the appropriate projects.Ensures proper linkage between investment as well as financing decisions and therebymakes contribution in the achievement of goals (Financial planning and itsimportance, 2018). Helps in ensuring stability in the business operations by reducing the level ofuncertainty pertaining to fund’s availability.B Evaluating both long and short terms sources of finance in the context of listed company Benefits and drawbacks of different long and short term sources of finance areenumerated below:Short term sources of finance Factoring
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