Report on case Study of Sweet Menu Restaurant

Added on -2020-02-05

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MFRD
TABLE OF CONTENTSTASK 1............................................................................................................................................11.1................................................................................................................................................11.2................................................................................................................................................21.3................................................................................................................................................3TASK 2............................................................................................................................................42.1................................................................................................................................................42.2................................................................................................................................................42.3................................................................................................................................................52.4................................................................................................................................................6TASK 3............................................................................................................................................73.1................................................................................................................................................73.2................................................................................................................................................83.3................................................................................................................................................8TASK 4 .........................................................................................................................................104.1..............................................................................................................................................104.2..............................................................................................................................................114.3..............................................................................................................................................12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14
INTRODUCTIONFinancial managements is very important that is required to be done by the financedepartment of any corporate. Financial success of the firm is purely based on appropriatedecisions taken by management. In order to attain financial objective, company requiresformulating strategic plans so that financial opportunities can be identified. The present report isbased on a case study where Sweet Menu Restaurant(SMR) has been taken into consideration(Jackson, 2010). The cited firm is well known for providing inter-continental food. Companyaims at expanding itself for which it is required to analyse the sources of finance. Citeddocument is prepared with the purpose to explain various sources of finance that can be adoptedby company. In addition to this, the requisite financial statements of different firms are alsoconsidered. Aim of this document is to enlighten the importance of financial management in thecited firm.TASK 11.1Finance is the most essential element that is required to run a business effectively. Toinitiate or expand a business, availability of different sources of finance is essential. Also, thereare two major sources of finance i.e. internal and external. Internal sources are those which arearranged within organization. On the other side, external sources are available outside thecompany (Hayre, 2015). As per the case study, management of SMR wants to open two newbranches in Central London and Croydon. For this, restaurant needs to arrange the amount of 300,000 and ₤ 500,000 for two branches respectively. Apart from that, for the same, there arevarious sources of finance available that can be adopted by management.INTERNAL SOURCES Retained earnings: It is the amount which is kept aside from the profits of company. Inthis, amount is taken after paying dividends to the shareholders and drawings by owners.The management of cited firm can adopt this source as it does not carry fixed burden ofinterest or instalments (Epstein and Buhovac, 2014).Sales of assets: In order to arrange the funds, company can use another source where theassets are sold and from the same, cash is generated. It may remain helpful for SMRbecause it can be useful for both; short and long term.1
Reduction of working capital: Reduction in working capital can be useful for companyas it can be done by lengthening the working capital cycle. It can assist firm to reduce theworking capital requirement. As a result, amount saved in working capital can be utilisedby the firm for new opening purpose (DRURY, 2013).EXTERNAL SOURCES Bank loan:It is an external source of finance where the amount is taken from financialinstitution. Over the loan amount, person needs to pay a fixed amount of interest. In orderto gain funds, cited firm can take loan from the bank. It will assist company to gainamount at specific rate of interest. Angel investors: Angel investors are the one who offer funds to start-up firms inexchange of convertible debt or equity shares issued by company. These investors payamount up to the limit of $500000. They are not interested in the monetary returns fromorganization but they want share in stake of company (Drechsler and Natter, 2012).Venture capital: Venture capitalist is the one who is interested in offering funds to theentrepreneur who has innovative business ideas but no money to implement the same. Inaddition to it, they take part in the profits of company.Shares: It is a part of share capital of the firm. An organization issues shares to the publicand in return, they require paying dividend. It dilutes the ownership of company and takepart in the decision making process of cited firm (Chazi, Terra and Zanella, 2010).However, the shareholder are the real owners of the company where an essential role isbeing paid by them. They are interested in the dividends of the firm and they take part inthe annual general meetings of the organization.1.2Management of SMR requires understanding the pros and cons of all sources which ituses. It can provide assistance to the cited firm to take requisite decisions regarding appropriatesource. The same is given as below.Retained earnings:The cited firm may get benefit of this source as it does not carry anyrate of interest. It is the process of ploughing back amount of firm (Broadbent and Cullen,2012). So, it can be useful for the stated firm. On the other side, disadvantage of same isthat it may be a limited amount which cannot fulfil the needs of company. In addition toit, amount of retained earnings can be taken after paying dividends and taxes where a2

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