Financial Analysis of Radisson PLC
Added on 2020-01-23
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MANAGING FINANCIALRESOURCES AND DECISIONS
Table of ContentsINTRODUCTION...........................................................................................................................3A) sources of finance.................................................................................................................3A) implication of sources of finance..........................................................................................3B) Evaluation of sources of finance............................................................................................4TASK 2............................................................................................................................................5A) Analyse the cost of finance...................................................................................................5B) Importance of financial planning...........................................................................................6B) Information needs of financial decision making....................................................................6C) Impact of finance on financial statements..............................................................................7TASK 3............................................................................................................................................7A) Analyse Importance of Budgeting........................................................................................7B) Calculation of unit costs and pricing decisions......................................................................9C ) Assess viability of project...................................................................................................10TASK 4..........................................................................................................................................11A) Financial statement of Radisson PLC.................................................................................11B) Compare different formats of Financial statements.............................................................12C) Ratio of both the companies.................................................................................................12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14
INTRODUCTIONFinance is that element in business which acts as a fortune teller which predicts about theuncertain changes taking place in near future. It provides a clear direction to an enterprise tomove ahead in future by defining all its actions to be taken. Radisson PLC has been selected forthis project which is a medium based enterprise who takes new business project of launchingnew software Bespoke to facilitate all other companies in UK. This report is all about definingdifferent sources of finance and its implications on business and also evaluation of its cost offunding. Comparison is done of current organisation with another with the help of ratio analysis.TASK 1 A) Sources of financeBank Loan- It is that sources of finance which is generally available for an enterprise forlong term purpose with higher amount. Radisson PLC can take this source of finance toaccomplish its business requirement of acquiring the long term business project of launchingnew software. The existing conditions will be helpful for an enterprise to take loan as they arenot novice player in the industry and bank can easily trust the company (Fletcher, 2016). Thecurrent image of an enterprise is facilitative for this organisation to take higher amount of loanwith less interest rate as they negotiate with the bank to maintain long term relationships.Retained earnings- It is another source of financing in which company can make use ofits existing profits which has been kept in a reserve after giving dividends to all its shareholders.It is an equity sources of financing in which an enterprise will utilize its internal finance tosource its external business project or any kind of business expansion. It is the cheapest mode offinance than compare to Bank loan in terms of interest rates and all (Kostova and Nell, 2016)other bank charges. The retained earnings' ratio will depict the internal ability of a venture togenerate higher net income to keep larger sum as a reserve. A) Implication of sources of financePositive effects of bank loan It helps in fulfilling business need to source all its business requirements by perceiving thecurrent ability of a venture to grant higher amount of loan.
It helps in tax planning in an enterprise as a person can take tax deductions due to theinvolvement of bank loan as a source of funds.Negative effects of bank loanTaking bank loan is not an easy job as it involves complexities in taking bank loan as thebusiness needs to give collateral security as per the standard guidelines of a bank beforesanctioning the loan. Guarantors need to be arranged by the business as the bank cannotgive their valuable to any strangers as they can be defaulters.Advantages of retained earningIt is that sources of finance which is also helpful for an enterprise for increasing its growth as itinvolves capital for improvements and expansion to remain competitiveness. It is beneficial for an enterprise to increase their overall return on investments and shareholders’equity as it enhances the value to pay good amount dividends to its existing shareholders.Disadvantages of retained earningIt results in higher amount of taxes in terms of state and federal taxes to be paid which isnot beneficial for an enterprise (Coronel and Morris, 2016). The higher profiteersgenerated to maintain the retained earnings will deteriorate the earnings of an enterprise.It also increases the dividends in order to maximise retained profits the company is notable to pay off all its shareholders adequate dividends and maintain an adequate amountof retained profits in an enterprise.B) Evaluation of sources of financeBank loan- It is that sources of finance in which amount can be borrowed for definedperiod within an agreed repayment schedule (Evans and Porter, 2010). This repayment amountwill be dependent on the size and duration of the loan and the rate of interest rates. The amountof interest can be higher or lower depends on the amount taken by Radisson to fund its businessrequirement. Due to the involvement of interest rate it is not a bad source of finance as itinvolves several benefits. One of the benefits is that it is a suitable part of the financial structureof an organisation as it tends to be more available for well established and growing businesses. It
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