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Managing financial resources and decisions : Assignment (mfrd)

   

Added on  2020-01-07

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MANAGING FINANCIALRESOURCES AND DECISION

Table of ContentsMANAGING FINANCIAL RESOURCES AND DECISION ......................................................1INTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Sources of finance ................................................................................................................11.2 Implication of sources of finance..........................................................................................21.3 Suitable sources of finance for Sweet Menu restaurant........................................................3TASK 2............................................................................................................................................32.1 Cost of sources of finance.....................................................................................................32.2 Importance of financial planning to Sweet Menu restaurant................................................42.3 Information need by different decision maker......................................................................42.4 Impact of sources of finance on financial statements...........................................................5TASK 3............................................................................................................................................63.1 Analyses of cash budget and necessary decisions.................................................................63.2 Calculation of Unit cost........................................................................................................63.3 Viability of two proposal .....................................................................................................8TASK 4............................................................................................................................................94.1 Financial statements..............................................................................................................94.2 Financial statements prepared by different organisation....................................................104.3 Analyse of financial statements by calculating various ratios............................................10CONCLUSION..............................................................................................................................11REFERENCES .............................................................................................................................13

INTRODUCTIONFinance is the branch of economic that is mainly concerned the management, allocationof resources and capital (Barnes and Pancost, 2010). Management of finance help the companyin maintaining a balance between inflow and outflow of cash that takes place within and outsidethe business organisation. Moreover, in the following report two restaurant have been considered(i.e Sweet Menu which is suited in Gants Hill of East London and the other is Blue Islandrestaurant whose financial position has been compared). In this report, various sources of finance has been identified for Sweet Menu restaurantalong with its implication. In addition to this, the cost that will be incurred by the company at thetime of using various sources. Along with this importance of financial planning of Sweet Menuhas also been discussed. In the following report, cash budget of Blue Island restaurant has beenanalysed in order to find out its flow of cash. In addition, viability of the proposal given isidentified by using investment appraisal techniques. At last financial statements of both thecompanies are analysed in order to conclude its financial position.TASK 11.1 Sources of finance INTERNAL SOURCES OF FINANCESale of assetsThis is one of the beneficial method that can be used by Sweet Menu in orderto raise its capital. By using this method, restaurant will be raising funds byselling out the old and obsolescent assets that is of no use.Retained profitIt is a part of profit that is kept by the company out of the revenue earned atthe end of the financial year. Retained profit is kept by the restaurant in orderovercome certain contingencies (Bhowmik and Saha, 2013).EXTERNAL SOURCES OF FINANCEBank loanThis can be said as one of the simplest method that can be used by SweetMenu in order to raise its capital. By using this method, company canborrow funds from the bank for a predetermined time period by submittingthe collateral security.Issue of sharesThis is another way through which Sweet Menu restaurant can raise largeamount of capital within a short period of time. In this method, firm issue1

shares to the general public and collect funds from them which they may notrequire to pay back.1.2 Implication of sources of financeSources Legal aspectsCost SuitabilitySale of assetsSweet menu restaurantis required to takelegal procedure intoconsideration at thetime of selling assets.By using this method,Sweet Menu can beable to meet itsfinancial needs but atthe same time assets ofthe company will alsodecrease.This method is suitablefor meeting short termrequirements. Becausebusiness is required tofollow a set limit bythe board of directorsin regard to the sale ofassets.Retained profitAs the law, everyorganisation isrequired to keepcertain amount ofprofit as a reserveswith them. In lieu ofwhich Sweet menurestaurant will be abletoovercomeuncertainty.By using this sourceSweet Menu will beable to meet itsfinancial needs at thatparticular time(Brigham and Daves,2012). But afterwardsthey may not be abletoovercomeuncertainty that canoccur in future. This source is suitablefor the Sweet Menurestaurant in order toovercome uncertainty.In addition, thismethod can also beused by the companyto expand its businessunit.Bank loanIf Sweet Menu is notable to repay theamount of loan takenby them from bankthan in that case bankhas the right to ceasethe assets of the Debt of the companymay increase if theymove on with thismethod becausecompany is required topay high interest rateto bank.This method is suitablefor expanding thebusiness units.2

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