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Managing Financial Resources in Marks & Spencer - Case Study

   

Added on  2020-01-21

13 Pages3267 Words55 Views
ManagingFinancialResources andDecisions

TABLE OF CONTENTSIntroduction......................................................................................................................................3Task 1 ..............................................................................................................................................31.1 Identifying sources of fund available to M and S..................................................................31.2 Assessing the implications of sources...................................................................................31.3 Assessing the appropriate sources of finance for M and S....................................................4Task 2...............................................................................................................................................52.1 Analyzing the cost of different source of finance..................................................................52.2 Explaining the importance of financial planning for the success of the M and S.................52.3 Assessing information needs for each decision maker..........................................................52.4 Explaining the impact of source of fund on Balance sheet and income statement................6Task 3...............................................................................................................................................63.1 Analyzing budgets and make appropriate decisions..............................................................63.2 Explaining the calculations of unit costs and making pricing decisions using relevantinformation...................................................................................................................................73.3 Assessing the viability of a project using investment appraisal techniques..........................7Task 4.............................................................................................................................................104.1 Discussing the financial statements.....................................................................................104.2 Comparing appropriate formats of financial statements for different organization............104.3 Calculation of the following accounting ratios....................................................................10Conclusion.....................................................................................................................................11References......................................................................................................................................122

INTRODUCTIONManaging financial resources helps the company in handling the finance (Hayre, 2015).This report is going to discuss about managing of financial resources and their decisions. It isbased on the case study of Marks and Spencer and it focused on sources of fund and theirimpacts and implications on business. In also covered, financial statements, ratios and theirformats.TASK 11.1 Identifying sources of fund available to M and SFor expanding business or for setting up of new branch, fund is required by M and S.funds are available from the internal and the external source (Fraser, Bhaumik and Wright,2015).Internal sourceRetained earning- This is an undistributed profit and this source of finance is availableonly to those business who is trading for more than 1year. The main benefit is that no interest ischarged on them (Chwieroth, 2015).Personal Capital- It is an owner's personal saving and fund is available to the companyby collecting money from them. In this source, no extra cost and interest is charged.External sourceBank loan- This is an external source in which money is available from the bank. Bankgrants loan to the company of fixed amount for fixed period of time it charges fixed rate ofinterest and with fixed repayments (Pike, Neale and Linsley, 2015).Issue of shares- Finance can be raised by issue of firm’s shares and then the profit of thecompany is distributed to shareholder in a form of dividend.1.2 Assessing the implications of sourcesSourcesLegalimplicationsFinancialimplicationsOwnershipBankruptcyRetained earningThe main legalimplication ofthis source is thatThis is theundistributed profit,which is used forNo ownership istransferred, itremains with theThis is used forfuture if M and Sfaces bankruptcy,3

it is available forthose companieswho are tradingfrom more than 1year.future and there isno financialimplication.company(Rashid, 2014).then they can usethis sourceBank loanIf the company isapplying for theloan then thepermission is tobe taken from theBoard ofmembers (Santos,and Spring,2013).The financialimplication whichcompany bears isthe bank chargefixed rate of interest.While grantingloan, securitiesare acquired bythe bank till theamount is repaidby the company.Bank keeps thesecurities if firmis unable to repaythe loan (Fraser,Bhaumik andWright, 2015).Equity sharesFor issuingshares,permission istaken from Boardof members.The implication isthat the industry hasto pay dividendfrom the profits.Ownership istransferred to theshareholders.Firstly, firm haveto clear all theaccount ofcreditors andafter thatremainingamount isdistributedamongshareholders(Hayre, 2015).1.3 Assessing the appropriate sources of finance for M and SFor selecting source of finance, organization has a variety of choices. For M and S bankloan and issue of shares are appropriate source of finance. From bank loan, they can borrowmoney from the bank and can also repay after a specified period (Hussain and Scott, 2015). For4

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