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Managing Financial Resources & Decision Making- Doc

   

Added on  2019-12-04

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Managing Financial Resources &Decision making

Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Sources of finance which are available to Hardwood Ltd................................................11.2 Assessing the implication of identified sources of finance..............................................21.3 Recommending the appropriate source of finance...........................................................2TASK 2............................................................................................................................................22.1 Analysis of the costs of different sources of finance........................................................22.2 Stating the importance of financial planning to Hardwood Ltd.......................................32.3 Assessment of the information need of the different decision makers.............................32.4 Stating the impact of finance upon the financial statement of an organization................4TASK 3............................................................................................................................................43.1 Preparation and analysis of the cash budget of hardwood Ltd.........................................43.2 Calculating the unit cost of the furniture and make pricing decisions.............................53.3 Assessment of the viability of the project through investment appraisal techniques.......6TASK 4............................................................................................................................................84.1 Purpose, structure and main sections of the financial statements of the company...........84.2 Comparison of the format of financial statements for different types of business...........94.3 Interpreting the financial statements of Hardwood Ltd..................................................10CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................11

INTRODUCTION Finance is the essential element of business upon which is required to implement thepolicies and strategies of an organization. Finance manager of the company make effectivefinancial plan which facilitates optimum utilization of the financial resources to the large extent(Brown and Petersen, 2011). By managing financial resources company is able to attain successin the competitive business environment. This project report is based upon Hardwood Ltd whoproduces or offers furniture to the retail sector or private home. The present report will discussthe various sources of finance which Hardwood need to undertake to expand their businessoperations. Besides this, it also develops understanding about the investment appraisaltechniques. This project report will provide information about the financial health andperformance of the company by undertaking ratio analysis. TASK 11.1 Sources of finance which are available to Hardwood LtdThere are several sources of finance which are available to Hardwood Ltd such as bankloan, leasing, issuance of equity share and debentures. By undertaking such sources of financeHardwood Ltd. is able to expand their business operations and functions more effectively.Various sources of finance which are available to Hardwood Ltd. are as follows:Bank loan: It is the more suitable source which will help Hardwood ltd in meeting theirfinancial needs. Company can easily meet their financial needs by approaching bank forloan on the basis of financial security. Through this, company can also get the taxbenefits and increase their profit margin.Leasing: Leasing is another important source of finance which provides opportunity toorganization to make use of machinery and other asset without making huge investment(Chavis, Klapper and Love, 2011). For this, organization requires to pay periodical rentto the real owner of the asset and return the asset after the definite time period.Issuance of equity shares: Hardwood ltd can also raise their finance by issuing equityshares to existing and potential shareholders. In this case, organization have to paydividend to their shareholders which imposes financial cost in front of the company1| P a g e

1.2 Assessing the implication of identified sources of financeDifferent sources of finance have different implications which affect the financial decisionsof an organization. Bank loan: In bank loan, financial institution has legal right to cease the assets ofHardwood if they make default in the repayment of loan and interest amount. Besidesthis, Hardwood ltd needs to pay interest for the financial assistance. It is considered asexpense for the company and there affects the gross profit margin of an organization.Leasing: If Hardwood ltd. takes resort of leasing to meet their financial needs then theyrequire returning the asset to its real owner after the predetermined time period. Besidesthis, Hardwood ltd needs to pay rent for making use of asset (Drivelos and Georgiou,2012). This aspect shows that leasing also imposes financial implication in front of thecompany.Issuance of shares: As per the legal aspects company requires to pay dividend to theirshareholders to build and maintain faith of the investors. Along with it, dividend aspectimpose financial cost in front of the company because it squeezing the profit aspect of thefirm.1.3 Recommending the appropriate source of financeOn the basis of the availability of sources of finance and their implications it isrecommended to Hardwood ltd that they needs to undertake bank loan to meet their financialrequirements. Usually, banks are always ready to give loan on the basis of collateral security. Inaddition to this, bank charges appropriate interest rate as compared to the other financialinstitutions (Guerrero, Maas and Hogland, 2013). Thus, by approaching bank for the loanHardwood ltd. can expand their business operations and functions. Through bank loan Hardwoodltd can limits the interference of the shareholders in decision making aspect. Thus, bank loan isthe more appropriate source of finance which helps in achieving their goals and objectives.TASK 22.1 Analysis of the costs of different sources of financeDifferent sources of finance impose different cost in front of Hardwood ltd which isenumerated below:2| P a g e

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