Managing Financial Resource and Decisions : Assignment

Managing Financial
Resources and
Decisions
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TABLE OF CONTENTS
INTRODUCTION................................................................................................................................3
TASK 1.................................................................................................................................................3
A. Identifying the appropriate sources of finance for selected business.....................................3
B. Evaluating the appropriate sources of finance for expansion plan of Radisson plc................5
TASK 2.................................................................................................................................................5
A. Analysis and evaluation of cost of debt versus equity financing............................................5
B. Significance of monetary planning and information need of decision-makers.......................6
C. Impact of recommended funding option on the financial statements.....................................7
TASK 3.................................................................................................................................................8
A. Importance of budget for variation........................................................................................8
B. Calculating unit cost and making pricing decision.................................................................9
C. Assessing the viability of the expansion project...................................................................10
TASK 4...............................................................................................................................................11
A. Discussion of financial statement of Radisson Plc...............................................................11
B. Comparison of financial statement of two companies..........................................................12
C. Interpretation of financial statement using suitable ratios....................................................13
CONCLUSION..................................................................................................................................15
REFERENCES...................................................................................................................................16
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INTRODUCTION
Financial resources are considered as one of the imperative aspect for success of business
as it helps in arranging other sources for maintaining higher rate of return of business. It covers
different activities through which cost of production can be controlled and rate of return for
business can be increased. Present report is based on Radisson plc a medium size computer
software manufacturing company which is operating in international marketplace. Furthermore,
sources of finance are explained for expansion project of the business. Furthermore, implication
of different sources of finance are also explained whereby corporation to get affected. In addition
to this, budgeting control, investment appraisal techniques and ratio analysis are also explained
along for selection of most appropriate project for the business.
TASK 1
A. Identifying the appropriate sources of finance for selected business
There are different sources of finance which can be accessed by business for successful
operation of corporation in the marketplace. For this purpose, below mentioned sources of
finance can be accessed by selected business-
Internal sources
According to the given case study, management of Radison is planning to expand its
venture in the marketplace which can be made possible only with the help of acquiring cost
effective sources such as retained profit, sale of old assets and owner's capital. It would be
effective Radisson plc to expand its business at large level and meet expectations of all related
stakeholders in an effectual manner (Lapsley, Miller and Panozzo, 2010). Furthermore, retained
profit is another aspect which is generally kept aside for investment purpose. This proves to be
effective for corporation to expand business at international level. It enables management to
deliver good quality of services to large number of so that accordingly competitive edge of the
business can be created in the marketplace. Moreover, sale of old assets reflects that management
acquire internal source of fund in order to meet short term requirement of corporation in the
marketplace.
External sources
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External sources of finance includes bank loan, issue of shares and leasing companies and
hire purchase etc. These sources can be acquired by corporation in order to increase flow of
production in the marketplace. Furthermore, issue of share is considered as the another important
aspect for raising the finance (Prorokowski, 2011). On the other hand, bank loan is also the
important source through which huge finance can be acquired for meeting the expansion related
requirement of Radisson plc. Moreover, leasing companies facilitates to provide highly equipped
assets for meeting requirement business in an effectual manner.
Assessing implication of sources of finance
The implication of different sources of finance can be understood effectively by focusing
upon its positive and negative aspects. It is because all sources of finance cannot be considered
as the same due to its higher cost and its direct impact of performance of business. Here,
management tend to focus upon both aspects so that accordingly well being company can be
ensured in the marketplace. For example, bank loan is granted only on the basis of collateral
securities and promise to pay off loan amount on right time (Vimpari, Kajander and Junnila,
2014). It would be effective for management maintain its credit rating in the marketplace. At this
juncture, they must pay off cost on right time along with payment of full installment on the basis
of agreed terms and conditions.
In addition to this, issue of equity share is another source of finance under which
company require to pay its dividend in case of profitability. However, in case business occur loss
then they are not required to pay return to the liable party. Furthermore, leasing companies
follow the long procedure for granting the loan which tend to affect rate of return of the business
to a great extent. Furthermore, sale of old assets tend might create chance of undervaluation of
the assets due to hurry. In this manner, Radisson plc must focus upon both positive and negative
aspect and then accordingly financial resources can be selected for its expansion project (Adams,
Litan and Pomerleano, 2010).
In addition to this, issue of equity share interfere the managerial decision to a great
extent. This happens because of dilution of control. For example, all shareholders are invited in
the board meeting so their views and suggestions can be incorporated in the decision making
process.
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