Managing Financial Resources - Assignment

Added on - 22 Jul 2020

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Managing financial Resources
Table of ContentsINTRODUCTION.....................................................................................................................................31.2 Implications of the different source of finance...........................................................................41.3 Evaluation of different financial source......................................................................................42.1 Cost of different sources of finance............................................................................................52.2 Importance of financial planning................................................................................................52.3 Information required for making decisions................................................................................62.4 Impact of finance on finical statement.......................................................................................63.1 Impact of finance on the financial statement.............................................................................73.2 Calculation of unit cost and prising decisions on the basis of given information........................73.3 Assess viability of project............................................................................................................8Task 4...................................................................................................................................................104.1 Major financial statement........................................................................................................104.2 Comparison between financial statement and types of business organization.......................114.3 Interpretation of financial statement using appropriate tools.................................................11CONCLUSION.......................................................................................................................................12REFERENCES.........................................................................................................................................13
INTRODUCTIONTo achieve long term success it is necessary for every company to efficiently use theiravailable financial resources because they are required in almost every operation of business.Basically there are two types of financial resources, one is internal resource other is externalresource. Decisions relating to finance are important because they give direction to the wholeorganization and so if they properly managed they can give impressive results to company(Arthur, Cheng and Czernkowski, 2010). Some of the major financial decision and planningis cost of finance, fund acquisition etc. An organization take significant decisions likepayments for investments, payment for expenses etc. in order to run business successfullybecause any mismanagement in terms of fund can do severe damage to whole organization.Their are mainly three financial decision first is related to investment, second is regardingfinance in which long term longs are considered and last is related to dividend which is notavailable for every company as only those firms who have issued their share in market haveto take decision relating to dividend that has to be paid to shareholders of firm (.Bennouna,Meredith and Marchant, 2010).Task 1P1.1 Identification of various financial resourcesSmall and medium enterprises is a competitive and challenging task which required to raisefinance and manage these resources in an effective manner. It is essential for the business isto evaluate these resources so that they can attain their long term goals and objectives.According to the given case study, creating and developing a small retail store required alarge amount of capital in at the initial stage (Bradbury, 2011). Apart from that they alsorequired money for their operation activities so that they can provide high quality product andservices to its customers. There are various sources of finance which as discussed below:Internal sources: This is one of the most appropriate sources where the seated businessorganization is required to arrange their capital with its internal sources. In this case equity isone of the most appropriate approach where the venture capitalist provide fund to them forthe stake in their business.External sources: This is another sources where the SME entrepreneur can lend loan fromvarious financial resources. In the UK there are various banks which can provide loan for
their business in order to running a business so that they can operate their business in aneffective manner (Carballo-Penela and Doménech, 2010).1.2Implications of the different source of financeAs the discussed above there are various sources internal and external which can be used bythe cited business unit. Each sources are having its own impact on the operations and futureperformance. Therefore, it is the responsibility of the company is to analyses its impact sothat they can provide consistent growth to its business.Impact of internal source of finance: According to the various expert’s equity finance is oneof the best option for the business. because credit issues can easily have solved by theorganization and if they having any loss they can recovered from partners. On the other hand,it can create various issues such as profit sharing, stake related issues (Collier and et. al.,2010). They can also can loss the control of command and decision making which having alarge impact on its business performance. It can lead to create conflict which is not good forthe cited company and its future growth.Impact of external source of finance: This is most usable sources which are using largenumber of small and medium enterprises. It is essential for a company is that to its impact onthe operational activities and business profitability which is the common goal for each andevery business unit. The disadvantages of these sources of finance is related with the cost dueto higher interest rate (Collins, Hribar and Tian, 2014).1.3Evaluation of different financial sourceAs the above mentioned discussion it has been analyses that the finance manager are requiredto conduct careful analyses of all these resources so that they can make their decision in anappropriate manner. Each and every business organization are using these sources accordingto its feasibility and profitability. In the context of given case, Trako retail store can use theseresources which can provide more efficacy and profitability. For example, if the firm canchoose equity finance they can negotiate with new partners so that both parties can satisfy intheir needs in the long term. On the other hand, if the cited business unit can selection bankloan which is more suitable for them. there are various financial institutions like bank whichcan provide capital to them. but the cost of finance is to high which can be reducing itsrevenue and profitability (Cui, and Ryan, 2011). The cited business unit can also use variouspolicies which provided by the UK government on the loan for start-ups. They provide
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