Financial Management and Decision Making

This solved assignment delves into the crucial aspects of financial management and decision making. It explores topics such as managing financial resources effectively, utilizing appropriate decision-making models for diverse situations, and integrating financial strategies with overall organizational goals. The assignment draws upon a range of academic sources and real-world examples to provide a comprehensive understanding of financial management principles and their practical applications in various organizational contexts.

Managing Financial
Resources & Decision

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Identification of Sources of finance available to Hari Pvt Ltd.......................................3
1.2 Implication of different source of finance........................................................................4
1.3 Appropriate source of finance..........................................................................................4
TASK 2............................................................................................................................................5
2.1 Cost of difference source of finance.................................................................................5
2.2 Importance of financial planning of Hari Pvt Ltd...........................................................5
2.3 Information needs of different decision makers...............................................................6
2.4 Impact of finance on the financial statements..................................................................6
TASK 3............................................................................................................................................7
3.1 Analysis the budgets and make appropriate decisions.....................................................7
3.2 Calculation of unit cost and make pricing decisions using relevant information.............8
3.3 Assess the viability of the two projects using investment appraisal techniques .............8
TASK 4............................................................................................................................................9
4.1 Discuss the main financial statements..............................................................................9
4.2 Compare appropriate formats of financial statements for different types of business...10
4.3 Analysis financial statements using appropriate ratios and comparisons, both internal and external
..............................................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................11

INTRODUCTION
Finance is a life line or essential of any organisation and no business can live in lack of adequate
accessibility of finance. J Sainsburry PLC is the second largest series of supermarket in UK that have
16.9% of shares of the supermarket sector in UK. In this report Hari Pvt Ltd. is taken as a company in
order to realize various prospect of finance. In this report source of finance are identify for the Hari Pvt
Ltd and after identified the source of finance, assessment of implication of such sources are done and
also evaluate the appropriate sources of finance which are suitable for the Hari Pvt Ltd. It also describes
implications of sources of finance by analysing the cost of each sources and it also explain the the
importance of financial planning which are taken by the Hari Pvt Ltd and also determine the subject
matter which are needs of inner and outer judgement makers. It also describes the impact of financial
statements by adopting the sources by Hari Pvt Ltd. This report will also make to be able to make
financial decision based on the financial information such as budget, cash or by calculating the cost of
unit. It also help the company to evaluate the financial performance of a business by discussing the main
financial statement and by making comparison of different formats and at last interpretation of the
financial statement can be done by the Sainsburry PLC.
TASK 1
1.1 Identification of Sources of finance available to Hari Pvt Ltd
Equity- It is common source of finance in which firm can issue the equity through IPO or FPO in
the market. By issuing the equity the firm can collect the fund from the public(Snell, Morris and
Bohlander, 2015.). In this process, firm can issue the prospectus and investors can invest there capital by
purchasing its shares, so that by getting the fund from investors by selling the securities will help the
firm to expand there business.
Debt- Hari Pvt Ltd is largely used debt as a source of finance for making there operational
activities, in this way firm can take a loan and need to pay interest in fixed or floating rate. Mainly firm
can repay the loan by using fixed interest rate but in condition of floating interest rate it will increases
the firm's finance cost.
Retained Earnings- This is part of revenue which are still remains after paying all the expenses in
a firm, it is mainly generated to the internal source of finance so that it focus in internal activity of the
firm. So that Hari Pvt Ltd can take the finance in the source of retained earnings.
Private Equity- This source of firm is a alternate of the equity which are taken by the private
equity firm and promised to repay the provides fund to the firm. In this Hari Pvt Ltd is required to take

60% of the share to take the influence of another company. So that this source of finance is used for the
growth of the firm.
1.2 Implication of different source of finance
Equity- Equity is main source of finance but it have there some advantage and disadvantage too.
In case of the equity, firm has to pay divined to the shareholders so that the rate of dividend is higher
than the interest rate. Every year it is not necessary to give the dividend to the shareholder so that it is a
main disadvantage that Hari Pvt Ltd faced. But in merit side equity is the cost of finance which are
adjustable in nature.
Debt- By taking finance in the form of debt, there will be some fixed and floating rate to repay
the loan. All this activity is requires lots of paper work and documentation. So that Hari Pvt Ltd often
take debt as a source of finance.
Retained Earnings- By using retained earning as a source of finance, Hari Pvt Ltd does not need
to make any legal implications and by taking the retained earning as a source of finance it does not make
any affect in the controlling system so that it does not make any negative impact in firm's activity.
Private Equity- order to get source of finance in a form of private equity, it will need lots of legal
implication and paper work so that it diluted the power of the existing shareholders. So that in Hari Pvt
Ltd by taking finance from private equity firm have to be careful by making all the activity.
1.3 Appropriate source of finance
In state to select a proper source of finance, it is important to look the company's current position
in the market(Purce, 2014). To look the company's current position, manager can analysis the different
source of finance and also examined the negative and positive impact of the source of finance. So that it
can be say that to identify the effective source of finance Hari Pvt Ltd can first identify there current
position and also analysis the impact of the different sources which affect the company's operational
activity. If Hari Pvt Ltd take equity as a source of finance than the majority of the shareholder will be
diluted and if the firm uses debt as a source of finance than firm face lots of loan liability in future so
that firm can use both the two source of finance. Hari Pvt Ltd can not use private equity as a source of
finance because it will increases the majority of new shareholders and by taking retained earning it is not
sufficient for the Hari Pvt Ltd to take as source of finance to fulfil there all need. Due to this reason,
equity and debt are taking by the Hari Pvt Ltd as appropriate source of finance.

TASK 2
2.1 Cost of difference source of finance
Equity- Dividend paid on issued shares and share issue expenses are the cost of the equity as a
source of finance. The rate of dividend will also be determined by the top management, so that it can be
sat equity as a source of finance is adjustable by nature.
Debt- By taking debt as a source of finance, interest are to be paid by the firm(Kaplan and
Atkinson, 2015). Such interest rate will be fixed or floating. All these type of interest rate charge a
certain amount of percentage by a firm. Basically firm choose the floating interest rate and give certain
percentage as per the loan provided by the bank to the firm. But in some times floating rate also
increases the finance cost of the firm. So that there are many factors are checked by the Hari Pvt Ltd
mangers to take a loan at the specific interest rate.
Retained Earnings- In a retained earnings there is no cost charged by a firm, because retained
earnings are generated from the past event or past earning, so that it is a best or possible use of retained
earning by the Hari Pvt Ltd which make them benefited in future. Hence in this way it can said that all
these three sources of finance are appropriate by a Hari Pvt Ltd but in this retained earning is a source of
finance which does not charge any cost while providing as a source of finance.
2.2 Importance of financial planning of Hari Pvt Ltd
Money is very limited sources which volatile in nature. So that to make an effective financial
planning by the finance manager, it will help to allocate the source of finance in a right direction. In Hari
Pvt Ltd, the major problem is arise to allocate the financial source so that company can run effectively
and efficiently. In this way manager has to make an effective financial plan so that manger can focus
each and every activity in a firm. By making an effective financial planning, it will help the firm to
identity there appropriate source of finance and it will also help to use such finance in an effective
manner(McKinney, 2015). By making a effective financial plan, manger can identify the such areas
where resources are really required, in this way manger can identify the area and by proper allocation of
resources manger help to create a good efficiency of a firm. By making effective planning Hari Pvt Ltd
also receives many other investment options, for example, if Hari Pvt Ltd can allocate the resources in
proper manner, it will help them to use extra financial resources for making investments in options,
future and forward. In this way, it will gives the opportunities to expand there business in the stock
market by issuing large number of shares for the shareholders. In this way, it can be said that financial
designing plays an essential role in making best use of financial resources or funds and Hari Pvt Ltd
must do financial planning in a proper manner(Kabir, Sadiq and Tesfamariam, 2014).

2.3 Information needs of different decision makers
Mangers- Mangers are those who manage the organisation at top level to middle level. They
make full control in each and every organisation activities. These take day to day business operation of
Hari Pvt Ltd and put there efforts to increase there sales by giving the products. So that by increasing the
sales mangers should have to examined the financial statements of the firm(Johnson, 2014). By
analysing the financial statements, mangers can able to identify or determine the firm's current position.
So that manger have to receive income statement and balance sheet to identify the firm's current
financial position. Thus it can be said that firm's financial statements is major source of information
which are required by the mangers.
Creditors- Creditors are person who lend money ion Hari Pvt Ltd. So that creditors are required
to take company's financial statement as information so that they can identify the company's current
position in the market. So that financial statement are required by the creditors because on the basis of
financial statement creditors can decide that how much amount they want to lend in Hari Pvt Ltd. By
doing ratio analysis, creditors are need to take financial statement of the company to analysis at which
position the company is stand. Hence, creditors are need the financial statement of the company to
examined the current position and determining the lending amount as per the certain period of time(Hill,
Jones and Schilling, 2014).
Government- Hari Pvt Ltd pay a tax to the government, so that government are also interested to
take the company's financial statements so that to check that the company is accurately pay the tax
amount or not. So that financial statement of the company is also an information which are required for
the government to analysis the real tax amount which the Sainsburry paid.
2.4 Impact of finance on the financial statements
Economics to large lengthy affects firms financial statements. Even if Hari Pvt Ltd company
increase finance by using debt or equity in both case changes will be determined in the fiscal authorities
of the firm. If Hari Pvt Ltd takes a debt of 60000 then its long term obligation will be increases. This
means that its obligation side will increase in the balance sheet. On pickings a loan firm is getting cash
and due to this reason cash area in current assets of the asset side of the balance sheet will increase. It
can be said that if firm take a loan then both possession and obligation side of the balance sheet will
increases. On the other hand, if a firm issue share of 100000 then stockholder stake in the obligation side
of the balance sheet will increases. This amount will be ADD in the titled up capital part of the
stockholder equity. On issue of shares firm is receiving cash in big amount. Due to this account, bank
sum of money in the asset side of the balance sheet will get increased. Hence, it can be said that finance
affects the financial statements of the firms(Guerrero, Maas and Hogland, 2013).

TASK 3
3.1 Analysis the budgets and make appropriate decisions
Budget of Hari Pvt Ltd as follows:
Cash budget contains all the items which are used as undertaking sources and also uses of cash in
future. In this way, cash budget make a full records of all the financial sources which are required by an
firm in fulfilment of future needs or demands. If budget is not managed than sources are arranged from
the additional sources of the firm. If we face at the cash budget of the Hari Pvt Ltd, we noticed that firm
can invest there funds by making many expenses such as salaries with 41000 $, Fringe 8200$, supplies
with 1000$, equipment in 3000$, phone expenses with 1150$, utilities with 1200$, insurance expenses
with 1400$ and rent with 7500$, so that total expenses are 64450$ . In income side, firm can earn the
income from department of public health, united way, membership and department of welfare. So that
the firm earn 64450$. As per the budget is clear that firm can use there fund both expenses and income
equally. So that firm need ton use different approaches so that they can mange there expenses and
income in an appropriate manner.

3.2 Calculation of unit cost and make pricing decisions using relevant information
If we face at the services which was provided by the Hari Pvt Ltd, we observance that the
company have to expenditure 10 $ as set outlay and 3 $ as changeable outlay. So the total cost of per
services stands at 13 $. If the firm want to make 30% earnings per service that makes 3 $ per service
which they are provided for. and the firm also has to give tax such as 20% per service rendered which
stands 2 $ per service rendered. So the final selling amount of the per service rendered stands at 30 $.
By analyse the valuation scheme, we will use the break even point analysis:
Break even Point= Fixed Cost/ (Unit Selling Price- Variable Costs)
So in Hari Pvt Ltd we have,
Fixed outlay= 10 $
Changeable outlay= 3 $
Unit marketing monetary value= 13 $
So break even point of Hari Pvt Ltd will be 10/(13-3)= 1 $
It means to achieve a net sales of 15000 euro; the firm also has to sell about 938 services per
day.
3.3 Assess the viability of the two projects using investment appraisal techniques
For Proposal A
Year Cash Flow
($)
Cumulative Cash Flow
0 -1200 -1200
1 800 -400
2 600 200
3 400 600
4 200 800
5 50 850
Hence, payback for proposal A= 1+ 400/600= 1.667

So payback for proposal B= 3 Years
So Relatively proposal A seems better cause it gains investment earlier than the proposal B.
NPV for Proposal A= -1200+800/1.1+600/1.21+400/1.33+200/1.46+50/1.61
= 491.1934 $
NPV for proposal B= -1200+300/1.1+400/1.21+500/1.33+600/1.46+550/1.61
= 530.28$
So if we consider net present value of the two options proposal A seems better because it have invest
less amount of money to achieve more profit.
TASK 4
4.1 Discuss the main financial statements
Financial gain Statement- Financial gain statements are also known as profit and loss statements,
in this report Sainsburry financial action in the way of profit or loss over a specific time period. Net
profit or loss can be incur by deducting spending from gain. The basic element of income statements is
revenues, expenses and profits. At the year ended it can be made by listing all the expenses and income
which are occur during this period by a firm and after that profit or loss are to be estimated(Finkler,
Smith, Calabrese and Purtell, 2016).
Balance Sheet- Balance sheet represent the financial position of the firm. It include two sides,
first is assets side in which all the debited items such as current assets, fixed assets, investment etc, are
recorded in it, and it liability side it includes all the obligation such as creditors, provisions, share capital
etc. which are credited to be recorded in it.
Statements of Cash Flow- Statements of cash flow describes the net cash outflow and inflow
from the firm. It deals only cash related transactions(Finkelman, 2015).

Statements of Owner's Equity- The statement of proprietor's equity reports alteration in owner's
or partners' equity between accountancy time period. The key element are the opening equity balance,
add-on and step-down during the period, plus an ending balance.
4.2 Compare appropriate formats of financial statements for different types of business
Format for income statement- In income statement format, it includes revenue first and than the
expenses is followed. While calculating the net income expenses are subtracted by the revenues of the
business. This is most common method of creating net profits and it will also help to calculate cost of
goods sold by a firm during a particular period. If there is cost of goods sold than income statement is
more involved statements(Dekker, Fleischmann, Inderfurth and van Wassenhove, eds., 2013).
Format for the balance sheet- For a small business balance sheet are used in a simple form but in
big organisation, assets and liabilities are sub- divided into the balance sheet as current and long-term
assets and current and long-term liabilities. In which current assets are those assets which are easily
converted into cash, for example: short-term investment or checking account. But in long-term assets it
includes all those things which take longer time to convert into the cash, for example: real
estate,equipment etc. In such a way, current liability are those debt which are due within the next year
and long-term liability are those due more than one year from the date of the balance sheet(DRURY,
2013).
Format for cash flow statement- It shows the actual inflow and outflow of cash during the
financial year in a firm. It helps the mangers and investors to determine the cash requirement or any type
of cash difficulty which is managed by the cash flow. It start with the cash flow from operations and
after that cash flow from investment and operation are steps followed while making a cash flow
statement(Brigham and Ehrhardt, 2013).
Hence as per the above financial statement, sole trader prepare only income statement because
they need only profit and loss account at the year ending to analysis there organisation's condition that
firm was in profit condition or loss. But inn the case of partnership firm, they can prepare all the
financial statement such as income statement to estimate there profit or loss condition, balance sheet so
that they can estimate there Firm's financial position and cash flow statement so that they can determine
net cash outflow and inflow of cash during the accounting period. Partnership firm, also prepare a
partnership account which are full record each and every partners capital. In this way, all the financial
statements are made as per the international accounting standards. In case of company, they can make
all the financial account such as income statements, balance sheet, cash flow statement etc. to determine
the company actual position inn the market.

4.3 Analysis financial statements using appropriate ratios and comparisons, both internal and external
particulars Sainsbury Tesco
2015 2016 2015 2016
GP ratio 5.08 6.19 -3.9 5.2
operating margin 0.34 3.01 -10.1 1.9
NP ratio -0.70 2.00 -9.22 0.25
Net Income -166 471 -5741 138
EPS -0.08 0.23 -2.21 0.05
Return on Assets -1.00 2.81 -12.71 0.31
As per the above ratio analysis and comparison of the two internal and external companies
(TESCO and Sainsburry) it will concluded that, in 2015 the gross profit of Sainsburry was 5.08 which
increases with 6.19 in 2016, there operating margin was increases from 0.34 to 3.01, Net profit of
Sainsburry was increases from -0.70 to 2 and there net income was also increses from -166 to 471 in
2016. By making comparison of Tesco and Sainsburry it will describes that GP ratio of Sainsburry is
greater than Tesco with (6.19- 5.2= 0.99 %) and the Net profit is also high by (2.00- 0.25= 1.75%) but
the net income of Tesco is higher than Sainsburry with (471-138= 333). So in this way, as per above
comparison, Sainsburry have higher opportunities to choose there objects in comparison of
Tesco(Baxter, Bedard, Hoitash and Yezegel, 2013).
CONCLUSION
Fiscal determination is essential role which a fiscal manger must perform. It is essential to make
omniscient determination about when, where and how should a business get funds. Funds can be non
inheritable through many ways and channels. A safe financial structure is said to be one which aims at
increasing shareholders return with minimum risk. In such a scenario the market value of the firm will
maximize and hence an optimum capital structure would be achieved. Other than equity and debt there
are several other tools which are used in deciding a firm capital structure(Anderson, Sweeney,
Williams, Camm and Cochran, 2015).

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Online
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