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MANAGING FINANCIAL RESOURCES MANAGING FINANCIAL RESOURCES

   

Added on  2020-01-07

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MANAGING FINANCIALRESOURCES

Table of ContentsMANAGING FINANCIAL RESOURCES.....................................................................................1INTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 The sources of finance available to a business......................................................................31.2 Implication of sources of finance..........................................................................................41.3 Evaluation of appropriate sources of finance for a business ................................................42.1 Cost of sources of finance ....................................................................................................52.2Importance of financial planning and how it is undertaken ..................................................62.3The information needs of internal and external decision makers..........................................72.4 Impact of finance on financial statement..............................................................................73.1 Cash budget for cited organisation........................................................................................83.2 Calculation of unit cost along with the making of effective pricing decisions.....................83.3 Different investment appraisal techniques for the organisation..........................................10TASK 2..........................................................................................................................................124.1Main financial statement with their purpose, contents and makers.....................................124.2Comparison between different financial statement .............................................................134.3Interpreatation of financial statement by using different ratios and comparison.................13CONCLUSION ..............................................................................................................14REFERENCES..............................................................................................................................15

INTRODUCTIONFinancial resources are the basic elements which helps a firm to operate their daily androutine operations. Firm uses its shares in the market and number of people buy such shares andpay some money to the company. Such shareholders are the financial resource of the company.The term financial resource is made with the combination of two words: financial which is in theform of money and the other one is resources which means the way. So, by the term financialresources means the way through which money enters in the business. Money is a basic need of abusiness and proper allocation of resources is compulsory. For this purpose entity have toprepare budget in which all the operations which are related with the business is mentioned.Thishelps in making the decision of the business effective and helps in made a positive impact ofsuch decisions on the organisation. All such factors are going to discussed in this report withmore evaluation with the help of taking the example of Sainsbury with its budget.TASK 11.1The sources of finance available to a businessBusiness Loan: Business loan is a traditional but still popular source as a funding optionfor start-ups and retained equity is an additional advantage (Zhu and et. al., 2010). Even thegovernment support in the availability of these kind of loans to small business firms. Banks alsoprovide long-term kind of finance for start-ups. The bank states the fixed period in which theamount is to be paid back, the rate of interest and amount of repayments. The banks usually asksfor some security for the loan from the start-ups, and these security generally are in form of theentrepreneur's personal guarantee. These form of funds are good for investing finance in fixedassets and are usually at a lower rate of interest. Outside Investors (Share Capital): One of the main source of investment in a start-upare family and friends of the entrepreneur. Opinions of either of them may sometimes differ incase of the influence of the one who came out with the idea and how strong it is. Investments ofan average amount for a longer period may depend on the individual's encouragement towardsthe entrepreneur whom he personally know. May be they are ready to invest but not interested inparticipating in the daily operation of the business. Business Angels: Angel investors are professional investors and the amount theygenerally invest in a start-up may differ from £10k - £750k. Angels are experts in proven

entrepreneurship and tend to invest in businesses with huge growth prospects (Surroca, Tribóand Waddock, 2010). Their part of investment either comes out of their already settledbusiness or selling their own business.1.2 Implication of sources of financeLoans: Debenture loans, usually secured against asset of the entrepreneur or investor.The sources of loans usually charges variable or fixed rate of interest on the amount loaned. Thismakes the entrepreneur unable to send the asset without the priority of the lenders agreement(Kusumasari, Alam and Siddiqui, 2010). And in case, the shareholder or theentrepreneur fails to pay the loan within the given time period, the cost will be repaid even itmay result in a loss by the sale of the asset assigned as security against the loan. Venture Capital: The source of finance best for a newly started business firm at its earlystages. High level of risks are predictable in the way if this source of finance is owned. But alsothe possible potentials seem are big too. The venture capitalists generally look for a share in thefirm's equity and it can be the biggest part of the risk. They often look for a strong return for theirinvestment. Venture capitals are mostly being acknowledged by the shareholders andentrepreneurs for their important presence while in the running of the business to prove the valueof themselves.Credit from Suppliers: Supplier credits are issued for 30 days or more. Maximumamount of time can be taken by a company to get the money utilized very well and pay backwithin the interim period so that they could finance other things (Rockey and Collins,2010). This method should be considered cautious to make sure that the invoice is been paid ontime. Otherwise, the firm might end up upsetting the supplier and the future workingrelationship will be jeopardised.1.3 Evaluation of appropriate sources of finance for a business There are two types of sources in the sources of finance for abusiness. They are: External sources, andInternal sources.The sources of fund included in external sources are:Loans

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