Financial Planning for Businesses
Added on 2020-02-05
20 Pages5607 Words346 Views
|
|
|
Managing FinancialResources and Decision
TABLE OF CONTENTSIntroduction......................................................................................................................................3Task 1...............................................................................................................................................31.1 Sources of finance..................................................................................................................31.2 Implication of financial sources.............................................................................................41.3 Appropriate source of finance................................................................................................5Task 2...............................................................................................................................................62.1 Cost of financial sources........................................................................................................62.2 Importance of financial planning for Clariton Antiques Ltd.................................................72.3 Information that need to make effective decision..................................................................82.4 Impact of sources on financial statements.............................................................................8Task 3...............................................................................................................................................93.1 Cash budget............................................................................................................................93.2 Unit cost calculation............................................................................................................113.3 Investment decisions............................................................................................................11Task 4 ............................................................................................................................................144.1 Key components of financial statements.............................................................................144.2 Financial statement of sole trader and partnership firms.....................................................144.3 Financial ratios of Clariton Antiques Ltd............................................................................16Conclusion.....................................................................................................................................18References......................................................................................................................................192
INTRODUCTIONFinancial management is the strategy-forming process which is used by firms as primaryevidence to make effective economic decisions. Sound capital management is the necessity ofbusiness that assist in avoiding risk of insolvency (Tian and et.al, 2014). It is essential that firmhas capability to generate sufficient cash for enhancing profitability of the corporations. Presentreport is based on the case study of Clariton Antiques Ltd. Firm is having strong reputation in themarket and aiming to raise its funds. Assignment will discuss the sources of finance available toincorporated and unincorporated business. Evaluation of most appropriate source for cited firmwill be done in this study. Importance of financial planning with reference to budgeting, overtrading will be discussed in this report. Impact of venture capitalist and finance broker onfinancial statement will be explained in this report. Cash budget for Clariton Antiques Ltd will beprepared and to improve its economic position suggestion will be given (Coleman and Kariv,2013). As Cited firm is not engaged in the production so unit cost and pricing decisions will beillustrated in this study. NPV, ARR, PBP will be calculated for taking appropriate investmentdecisions.TASK 11.1 Sources of financea) Unincorporated businessUnincorporated businesses are those entities which are not having separate legalidentification. Owner is the person who is completely liable for the business liabilities. ClaritonAntiques Ltd is the partnership firm and work as unincorporated entity (Dinovitzer and Hagan,2014). Sources of finance available to such type of entities are as following:Personal saving (capital of owner and partners): It is kind of internal source in whichowner or partners are the persons those who invest their capital in the business forgetting high profit. It is appropriate financial source, advantage of this source is that ascompany needs not to repay this amount and no interest has to be paid (Roehrich, Lewisand George, 2014). So economically it is good for the entity like Clariton which isworking as startup company. But drawback is that owner and partners have to ensurethat they can generate profit otherwise they will have to face huge financial loose.3
Bank loan: It is external source of finance in which companies borrowed money fromfinancial institution at an agreed rate of interest for particular time period. Banks grantloan on the bases of financial position and repay capacity of the organization. Advantageof this source is that firms have to repay set amount as installment which is easy andgood for the budgeting (Weil, Schipper and Francis, 2013). But on other hand interestrates and security amount can enhance economic burden of the Clariton.b) Incorporated businessThese are called as corporation and having legal identification. In his owner or partnersare not responsible for company's debt amount. Sources of finance available to such type ofbusiness are as following:Retained earnings: It is the source of finance which is available for the entities thosewhich are running their operations for more than one year (Musamali and Tarus, 2013).In this company's profit ploughed back into business so that it can generate cash byreusing money. Advantage of this source is that no need to repay and no need to payinterest on it. But it may be possible that firms do not have enough profit which can bereused. Share issues: it is most common source of fiance for the limited firms in which entityissue share to public to obtain money. No interest need to be paid on it but divide needsto be paid to all shareholders. Apart from this, organization will have to share ownershipwith them that can be negative for the corporation (Kale and Niosi, 2017).1.2 Implication of financial sourcesa) Internal financial sourcesThere are many internal sources of finance, these are internal funds and reused by thefirms for further development. Retained earning is the most common source, no economicimplication is attached with it as company needs not to pay interest to any lenders. But it isnecessary to use this amount in appropriate manner so that profit can get generated otherwisefirm will have to face opportunity cost (Ince and et.al, 2013). As it is internal funds so no legalimplications are attached with it. Ownership and controlling power need not to be transferred toany shareholder. 4
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents