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Managing Financial Resources & Decisions: Assignment

   

Added on  2021-01-02

16 Pages3867 Words185 Views
Managing Financial Resources & Decisions

TABLE OF CONTENTSINTRODUCTION......................................................................................................................3TASK 1......................................................................................................................................31.1 Identification of sources of finance..................................................................................31.2Assessment over uses of financial resources....................................................................41.3 Ascertaining the most satisfactory source of finance for Clairton Antiques Ltd.............5TASK 2......................................................................................................................................52.1 Ascertaining the costs of sources of finance....................................................................52.2 Importance of financial planning for Cariton Antiques Ltd.............................................52.3 Assessing the decision making need of several stakeholders..........................................62.4 Explaining the impact of chosen funding sources on financial statements......................6TASK 3......................................................................................................................................63.1 Preparing and analyzing cash budget for Clariton Ltd.....................................................63.2 Explaining unit cost and how it helps in taking pricing decisions...................................73.3 Assessing viability of projects using investment appraisal techniques............................8TASK 4....................................................................................................................................104.1 Discussing the key components of financial statements................................................104.2 Comparing format which is used by Clariton Ltd and other business units..................104.3 Interpreting financial statements using ratio analysis technique....................................11CONCLUSION........................................................................................................................14REFERENCES.........................................................................................................................15

INTRODUCTION Financial management is vital for the organizational growth and success in the recenttimes. In the competitive business arena, firm can offer products to the customers at suitableprices only when it makes effectual use of financial resources. Now, for the purpose ofdecision making and making optimal use of funds manager employs several monetary toolsand techniques. The present report is based on Clariton Ltd which offers antique products orservices to the customers. In this, report will present the financial sources which business unitcan undertake for financing expansion. Further, report also depicts how budgeting, unit costassessment, investment appraisal and ratio analysis too aid in decision making aspect. TASK 11.1 Identification of sources of financeIn order to make the business more profitable and have the adequate gains there has beenuse of various sources which will be helpful for having the sound capital structure. ClaritonAntiques Ltd will be beneficial as if they move to public ownership. Thus, such reform willbring sudden growth in the capital structure and that will be assistive in making operationalplan for the business (Shanas and et.al., 2017). Moreover, there are several techniques whichwill be fruitful for business as per having suitable sources of finance such as:Unincorporated Business: this is the private unit which has been owned by one of morethan one person which does not possess a separate legal entity form its owner. Moreover, thebusiness does not be treated as the separate person it will not have any single identity in themarket (Unincorporated business, 2018). Therefore, the main disadvantages of these kinds ofbusinesses are that there will be manipulation of funds as the owners will have higherliabilities and debts which will lead to insolvency.Incorporated business: These are the business units which has their own person separateidentity apart from the owners of business. Thus, the liabilities as well as debts of businesswill be balanced and have the effective outcomes. It can be operated solely or in partnershipwhich consists of various benefits such as tax deductions, liability protection as well as theycan become able to generate the capital through selling securities. Therefore, it will besuggested to Clariton Antiques Ltd that must proceed through incorporated business

partnership. It will bring them special remedies; exemption in the tax deduction as well as itwill generate the required finds for the business operations.1.2Assessment over uses of financial resourcesIn a company there may be various sources of finance on which the professionalsbecome able to gather required amount of funds. The generated funds will be used inimproving managerial efficiency, production as well as business objectives. Moreover, thereare two main sources which will be helpful in gathering the required amount of funds such as:Internal sources:There can be various internal sources of finance which will be helpful in meeting theinitial requirements of funds. The main advantage of using the internal sources is that thereare not requirements of making the interest payments or taxes over it. However, in includesseveral sources such as:Owner’s equity: the savings and funds gathered by owners of business will be helpfulin meeting the essential requirements. Therefore, Clariton Antiques Ltd will be beneficial asif all the four partners will contribute some funds for the further expansion of business (Egeand Bauer, 2017). However, it will not require the interest as well as it will have remediesand deductions in tax.Sale of inventories: the amount earned from the operational activities of the businesswill be a good source for funds. Thus, in relation with the same there is needed to haveincrement production, marketing and selling activities of the business. Clariton Antiques Ltdwill have effective growth in the revenue as if the antiques were designed as per theconsumers’ requirements and which meet their satisfactory level.Sales of assets: The assets such as machineries, equipments, furniture etc. which doesnot have appropriate value in the market as well as are inefficient to meet the required levelof production. Therefore, these kinds of scrap assets needed to be sold out which willgenerate funds for Clariton Antiques Ltd.External sources:There can be various effective external sources which will be helpful in gathering theadequate amount of funds for the operations. Thus, main advantages of these sources are that,company can have effective revenue generation which in turn makes the adequate gains to the

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