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Managing Financial Resources and Decisions - Clariton Antique Ltd Assignment

   

Added on  2019-12-28

19 Pages5460 Words148 Views
Managing Financial Resources and Decisions1

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Identifying sources of finance available to incorporated and unincorporated business........31.2 Assessing implication of using internal and external sources of finance..............................41.3 Evaluating the most appropriate sources of finance for Clariton Antique Ltd......................5TASK 2............................................................................................................................................62.1 Analysis of the costs of two sources of finance.....................................................................62.2 Importance of financial planning...........................................................................................72.3 Assessing the information needed to make decision.............................................................82.4 Impact on financial statements..............................................................................................8TASK 3............................................................................................................................................83.1 Prepare and analyze cash budget...........................................................................................83.2 Calculating cost per unit........................................................................................................93.3 Assessing the viability of project.........................................................................................11TASK 4..........................................................................................................................................144.1 Different financial statements..............................................................................................144.2 Impact of finance on financial statements...........................................................................144.3 Interpretation of ratios.........................................................................................................15CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................172

INTRODUCTIONFinance is act like a transport that helps a business in order to reach a destination ofsuccess accompanied by higher base of customers and quality oriented skills. The Clariton Ltdhas been selected by an enterprise for assessing the existing capability of this business concern inorder to help them in a making business decisions. This project report is all about explainingvarious sources of finance by assessing its costs nod implications on the current entity. Thisemphasizes on preparing cash budget and calculating cost per product to determine its price. Thecapital budgeting technique is used to assess the viability of the project. The ratio analysis hasalso used to compare the performance of the business.TASK 11.1 Identifying sources of finance available to incorporated and unincorporated businessThere are different sources of finance which can be used by businesses for meeting theirrequirement related to different operational activities. However, sources of finance are differentfor incorporated and unincorporated businesses which are explained as follows-Unincorporated businessUnincorporated business refers to those which cannot issue the share and raise financefrom public for meeting their organizational objectives. It consists of different sources of financesuch retained profit, sale of old assets and bank loan. However, owner's capital can also be addedin the same through which business can increase overall rate of return and meeting theexpectations of different parties in an effectual manner (Purce, 2014). At this juncture, Claritoncan access of the listed sources in order to raise fund for its expansion. Moreover, short termsources can be easily accessed by management so they can contribute towards its success. Notonly this, but sources like sale of old assets and bank loan are also important which takerelatively less time. Hence, unincorporated business cannot raise their money through public orsimilar kind of sources.Incorporated businessIncorporated business refers to those which acquire fund from different parties sourcessuch as issue of share, retained profit and bank loan as well as leasing companies which assistscorporation to deliver good quality of services to large number of buyers in an effectual manner.3

Furthermore, equity share can be issued for raising long term finance through which business canmeet expectations of all related parties effectively (Abdelhak, Grostick and Hanken, 2014).Apart from this, retained profit generally takes less time to arrange through which ClaritonAntique Ltd can expand its business in the marketplace. Generally, incorporated businesses havescope of growth and development and accordingly they can easily access long term sources byreferring several options or alternatives.1.2 Assessing implication of using internal and external sources of financeThere are different sources of finance which can be availed to businesses effectively. Inthis manner, implication of different sources are explained in the following manner. The currentscenario reflects that Clariton is in need of £0.5 million for acquiring a building in Birmingham.Bank loan-Bank loan is acquired through financial institutions or reputed banks onbehalf of collateral security. This enables corporation to access cost effective source offinance in set time limit so that accordingly upward direction of business can bedetermined. Bank loan is the external source of finance which require companies tohigher loan along with certain rate of interest (Hill, Jones and Schilling, 2014).theimplication of loan from bank is that in case the interest is not paid on time the legalactions would be taken against the firm. Thus can affect the reputation of the firm to agreater extent. Retained profit-It is another source of finance which is arranged with the help of existingprofitability of firm which is kept aside for further investment. This source of financedoes not require to pay its cost to outside party. This is directly invested in the expansionof business for increasing overall rate of return in the marketplace. It is also an internalsource of finance which facilitates management to raise the money for investmentpurpose (Brigham and Ehrhardt, 2013).Issue of share-It is another source of finance which assists management of Clariton toraise finance through public. However, dividend should be paid by management on timealong with interference of different parties in the decision making process (McKinney,2015). Furthermore, issue of share tend to dilute the control procedure of business whichhas direct impact on its rate of return and business strategies.4

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