Managing Financial Resources Decisions Assignment (Doc)

MANAGING FINANCIAL
RESOURCES AND DECISON
MAKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Sources of finance available to business..........................................................................1
1.2 Implications of different source of finance......................................................................2
1.3 Appropriate source of finance..........................................................................................2
TASK 2............................................................................................................................................3
2.1 Cost of different source of finance...................................................................................3
2.2 Importance of financial planning .....................................................................................4
2.3 Information needs of different decision makers...............................................................4
2.4 Impact of finance on financial statements .......................................................................5
TASK 3............................................................................................................................................5
3.1 Analysis of budget............................................................................................................5
3.2 Calculation of unit cost ....................................................................................................6
3.3 Project evaluation techniques...........................................................................................6
TASK 4............................................................................................................................................9
4.1 Financial statements.........................................................................................................9
4.2 Format of financial statements for the firm......................................................................9
4.3 Ratio analysis .................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INDEX OF TABLES
Table 1: Calculation of budget ........................................................................................................5
Table 2: Calculation of unity cost....................................................................................................6
Table 3: Calculation of IRR.............................................................................................................7
Table 4: Calculation of pay back period method.............................................................................8
Table 5: Ratio analysis of Glaxosmithkline...................................................................................10

INTRODUCTION
Glaxosmithkline is the UK’s giant pharmaceutical company which is operating its
business across several nations of the world. In this report, sources of finance are described in
detail and their appropriateness for an organization is also determined. Further, budget is also
discussed in detail and comments on same are given. After that, project evaluation techniques are
discussed and practically applied on the firm’s cash flows. At the end of the report, ratio analysis
of Glaxosmithkline is done and comments are done on the performance of company.
TASK 1
1.1 Sources of finance available to business
Sources of finance available to Glaxosmithkline are as follows:
 Equity- Glaxosmithkline is primarily listed in UK and it is also listed on other recognized
stock exchanges like NYSE, NSE and BSE. Company for expanding its business can
raise capital through issuing FPO. Firm by using capital raised from issue of equity can
develop its distribution system and can invest money in its R&D activities.
 Debenture- Glaxosmithkline can also issue debentures in order to take loan from the
public at the specific interest rate (Brici, Hodkinson and Sullivan-Mort, 2013). Company
in return will be required to pay interest annually irrespective of its profitability. Thus, in
case of late execution of development of new or generic drug project, firm may find it
difficult to pay interest on time.
 Retained earnings- Like other companies, Glaxosmithkline can also use retained
earnings to finance its day to day working capital requirements. Effective utilization of
retained earnings will reduce the firm’s dependability on debt for performing day to day
operations.
 Consortium finance- Under this source of finance, a group of banks finance a single
project that belongs to an individual firm. One of these banks acts as the leader of cartel
of banks and coordinates all financing and group discussion activity among member
banks (Collis and Jarvis, 2002). By using this source of finance, large projects easily get
financed and due to this reason, this source of finance is very popular in USA and UK.
1.2 Implications of different source of finance
Following are the implications of different sources of finance:
1