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Managing Financial Resources : Assignment Sample

   

Added on  2019-12-03

24 Pages3996 Words149 Views
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TABLE OF CONTENTSIntroduction......................................................................................................................................1Task 1 Finance as a resource...........................................................................................................1Sources of Finance.......................................................................................................................1Implications of each source.........................................................................................................3Case Studies.................................................................................................................................4Task 2 Understand the implications of finance as a source.............................................................5Financial planning.......................................................................................................................5Financial decision making...........................................................................................................5Sample of Financial Statements...................................................................................................6Task 3 Making Financial Decisions................................................................................................8Analysing the sales budget and cash forecast..............................................................................8Investment appraisal methods....................................................................................................10Costing and pricing review........................................................................................................13Impact on the profits..................................................................................................................16Task 4 analysing the financial performance..................................................................................17Accounting terminology............................................................................................................17Evaluation of Ratios..................................................................................................................18Conclusion.....................................................................................................................................19References......................................................................................................................................20

LIST OF FIGURESFigure 1: Source of Finance.............................................................................................................1Figure 2 Positive and Negative implications of Internal Sources....................................................3Figure 3: Positive and Negative implications of External Sources.................................................4

List of tablesTable 1 Format of Income Statement..............................................................................................7Table 2: Format of Balance Sheet...................................................................................................7Table 3 Sales Budget.......................................................................................................................8Table 4: Cash Flow Forecasts..........................................................................................................9Table 5: Calculation of ARR.........................................................................................................10Table 6: Calculation of IRR...........................................................................................................12Table 7 NPV calculation for project A..........................................................................................12Table 8: NPV calculation for project B.........................................................................................13Table 9: Impact on Break Even Point............................................................................................14Table 10: Profit and Loss at various levels....................................................................................16Table 11 ̈ Effects of fluctuations in BEP.......................................................................................16

Introduction Managing financial resources is a difficult task as it needs effective financial planning. Itis important to do planning at every step in order to attain productive results for the business. Thepurpose of this report is to evaluate how the financial is being managed within business. It willidentify the appropriate sources of finance for a business. It will also show the use of monetaryinformation for different stakeholders. At last the report will end in analysing the companystatements and the ratios Task 1 Finance as a resource Sources of Finance Figure 1: Source of Finance(Source: Bhowmik and Saha 2013)Any new business whether big or small in size can avail money from two sources whichare as follows:1

Internal Sources Retained profits – It is the amount of money derived after the payment of divided to theshareholders and after the withdrawing of capital from the partners. It is also regarded asthe ploughing back of profits (Kitchen and Confetto, 2010)Friends & Family – Money can also be arranged from easily available options such asfrom friends, family and close ones. External Sources:Bank Loan – These days’ loans are available for the business from several financialinstitutions. Loan are provided with the range from 1 to 25 years. It is the mostcommonly available option for the entrepreneurs (Ball, Jayaraman and Shivakumar,2012) Bank overdraft - All businesses are required to keep their personal accounts throughwhich transactions are performed. All the deposits and withdrawals are performed fromthe side of the bank. The overdraft are issued to fulfil the differences between theproceeds and its costs. Business angels – These people offers capital for the start-up generally in exchange forconvertible debt or ownership equity (Bonaci, Matiş and Strouhal, 2008). Trade credit – It is a kind of short term money which is given to the borrower in order topay for the goods which are received. It offers flexibility at the initial stages of thebusiness. 2

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