Financial Management for Organisations
Added on 2020-06-06
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MANGING FINANCIALRESOURCES AND DECISION
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Range of sources of finance available to build and expand XYZ Ltd..................................11.2 Implications of legal, financial and dilution of control with in the organisation..................11.3 Benefits of finance for the expansion project.......................................................................22.1 Evaluation of the cost of chosen sources of finance for the expansion project....................2TASK 2............................................................................................................................................22.2 importance of financial planning in success of business......................................................23.1 Cash flow forecast for the business project...........................................................................3TASK 3............................................................................................................................................43.2 cost analysis to determine margin and price structure..........................................................4TASK 4............................................................................................................................................53.3 Analysis of Investment option..............................................................................................5TASK 5............................................................................................................................................72.3 Type of information needs for each decision maker in organisational context....................72.4 Explain the impact of finance (bank loan and investments) on the financial statements......74.1 & 4.2 Purpose of income statements and the balance sheet with comparison betweendifferent formats of financial statements.....................................................................................84.3 Calculation of accounting ratios to determine the financial performance of business..........8CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................11
INTRODUCTIONManagement of Financial resources is the key functional area in managerial terms. This isone of the important and crucial aspect in terms of managing financial resources with effectivedecision making strategies (Zapata and Hall, 2012). In this report, opportunities to developtechniques to create and present useful information for make effective business decisions aredefined explained. Availability of resources in terms of generating funds for finance defined inthis context. Type of financial information which are used to make strategies and plans aredefined in this context. Planing and budgeting process illustrated by practical overview ofbusiness equations. How effective financial decision assist organisational structure to sustainablegrowth and development elaborated in this context.TASK 11.1 Range of sources of finance available to build and expand XYZ LtdThere are type of financial resources are found in respect of generating financialrequirement with in the organisation. Main financial resources subject to generating finance aredefined as follows:Owner's capital: owners of organisation contributes funds by their own. This is one ofthe cost effective source of funding with in the organisation. Business need not to pay any furthercost to external parties. Owner's keep significant share in profit in exchange of their contribution.Loans: this is one of the external source of funding which fulfil the short term and longterm requirement of finance with in the organisation. Company has to pay interest on the loanamount for a specific rate of interest. Short term loans contains high rate of interest and longterms loans contains low rate of interest (Yang and Wong, 2012).Retain earnings: this source of fund is considered as internal source of funding subjectto fulfil the financial requirement with in the organisation. 1.2 Implications of legal, financial and dilution of control with in the organisationLegal financial terms are used to analyse the sustainability of projects and investment.Financial sources are required to set of implications. Which are required to analyse the aspect interms of analysing the comparability of projects and investment. Debt financing and loans arethe sources of funding which contains lots of legal terms and procedures. Organisation has toface lots of legal formalities and aspects in terms of repayment and payback of loans and interest.1
All the legal terms and formats are required to analysed before adopting the financesource form market. It is required to read all the related documents and papers related to loansand bonds. Thirty party investments also bound the organisation subject to repayment of loansand debts. So it is required that organisation need to understand legal dimensions subject torepayment of loans.1.3 Benefits of finance for the expansion projectAs per analysis of financial resources subject to expansion plan in respect of XYZ Ltd, itis suggested that loan is considered as options for investment. There are some benefits of loansand short terms debts are defined below. Advantages of long term loans: long term loans and debts fulfil long term financialrequirement of organisation. This is one of the beneficial financial resource because interest ratesremain low on long term loans and advances (Witt, Brooke and Buckley, 2013).Advantages of short term loans: these are the type of financial resources which fulfilthe sort term financial requirement of organisation. Duration of short term loans do not morethan three years.2.1 Evaluation of the cost of chosen sources of finance for the expansion projectIt is seen that the cost of different source of finance remain associated with cost ofexpansion plan and project;Cost of debts and loans: organisation has to pay an specific amount of interest uponloans and advances. It is required to analyse the cost of operations and advances subject todetermine the cost of long term debts and loans. There is an annual rate of interest is mentionedupon loans and advances which is considered as cost of financial resources.Opportunity cost: the cost of losing the existing investment option to choose betteralternative is called as opportunity cost. In other words if an organisation opts a better investmentplans with its existing one, than the difference between the amount of new plan and existing planis called as opportunity cost (Spenceleym, 2012).TASK 22.2 importance of financial planning in success of businessREPORTTo Finance managerXYZ Ltd.2
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