Clariton Antiques Ltd Financial Analysis

This assignment focuses on analyzing the financial health of Clariton Antiques Ltd. It involves preparing an income statement and a statement of financial position, then calculating and interpreting key financial ratios such as net profit margin and current ratio to assess the company's profitability and liquidity over two financial years.

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MANAGING FINANCIAL RESOURCES AND DECISIONS

Contents
Task 1.........................................................................................................................................2
1.1 Sources of finance available for the company.................................................................2
1.2. Assessment of implication of sources of finance............................................................3
1.3 Evaluation of most appropriate source of finance............................................................4
Task 2.........................................................................................................................................5
2.1 Analysis of cost for the sources of finance......................................................................5
2.2 Explanation for justifying the importance of financial planning.....................................6
2.3 Assessment of information that will be needed on financing the takeover......................7
2.4 Explanation for the impact perceived on the financial statement....................................8
Task 3.........................................................................................................................................9
3.1 Preparation of Cash Budget.............................................................................................9
3.2 Perception gathered for determining the Unit Cost........................................................10
3.3 Investment Appraisal.....................................................................................................10
Task 4.......................................................................................................................................13
4.1 Discussion of Key Components of financial statements................................................13
4.2 Comparison of the format Presented by the company Clariton Antiques Ltd and sole
trader business for the financial statements and...................................................................14
4.3 Interpreting the financial ratio of the company Clariton Antiques Ltd..........................14
References................................................................................................................................16

Task 1
1.1 Sources of finance available for the company
It is difficult for the business people to fire up another business in the aggressive market. On
the off chance that the business people don't have satisfactory back, then it is inconceivable
for them keep up its exercises on smooth premise. To fire up another business, the business
people need to guarantee that they are monetarily solid and stable. Along these lines for
picking up this surety, the business people need to discover the viable wellsprings of back to
secure their proposed business extend. The new businesses require adequate capital until they
come to the breakeven point. There are different sources through which the capital can be
acquired. A rundown of some suitable wellsprings of back for the business person has been
given underneath:
Personal investment funds: The business person can take cash from his own reserve funds as
these are the most reasonable and simplest wellsprings of capital for any sort of new business.
In the event that they take the cash from their reserve funds, they require not pay any
premium. In addition, the business visionary can likewise utilize his Visas for expanding his
fund.
Sale of benefits: The business visionary can likewise raise cash for the business by auctioning
off his settled resources, for example, plant, jewelleries, arrive, hardware, and so on or he can
likewise keep his advantages as home loan.
Borrowings from family, relatives, and companions: The business person can likewise obtain
cash from his family, relatives and companions who can turn out to be of monstrous support
for the set up of the business.
Loans from the banks: The business person can likewise take credits from the business banks
to raise its capital for the business.
For example, to fire up a frozen yogurt organization, the business person can look for money
related help from the previously mentioned sources that can help them to do their operations
effectively.

1.2. Assessment of implication of sources of finance
The business needs satisfactory capital; generally, the business is much prone to flop over the
long haul. In any case, in this focused business world, it is very basic for them to confront
certain dangers. Therefore, before looking for monetary assistance from the previously
mentioned sources, it is essential for the business visionary of the frozen yogurt organization
to know about the ramifications of those sources:
Individual funds:
Legal: As the whole retirement sum is being contributed, there is chance for the business
person to run shy of capital because of the drained records. Additionally there is an
opportunity to lose the records that have been put resources into the business. Hence, he
ought to record his aggregate returns under the IT Demonstration.
Financial: The business visionary contributing his own investment funds is probably going to
hold up under the expenses of procurement and furthermore he doesn't have to pay any
enthusiasm against that sum.
Dilution of control suggestions: There is no danger of their capital being weakened.
Risk: Venture of the whole sum in the business may lead the businessperson to go wiped out
if there is no benefit.
Offer of advantages:
Legal: The sold resources must be guaranteed to be controlled by the proprietor for a drawn
out time traverse.
Financial: Repayment of the interests inside determined time is compulsory.
Dilution of control suggestions: There is an opportunity to lose control over those advantages.
Risk : If the business confronts misfortunes, the business visionary may neglect to repossess
those advantages once more.
Acquiring from family, relatives, and companions:
Legal: the business visionary must give a base return on initial capital investment to them.

Financial: The businessperson is commanded to pay a base measure of enthusiasm after a
specific time allotment.
Dilution of control suggestions: The financial specialists' control can get weakened in view of
the vulnerabilities.
Risk: It is important to pay the interests inside time as though the business is confronting
misfortunes then business visionary may get to be distinctly bankrupt.
Advances from banks:
Legal: The advances are taken to shield the company's benefits.
Financial: Instalment of the interests inside a predefined time is vital.
Dilution of control suggestions: Term credits can be utilized as working capital. In any case,
it can prompt to the loss of control over the shareholders' assets along these lines influencing
the business extend.
Risk: The proprietor can utilize the advance add up to ensure the individual resources despite
the fact that the business gets to be distinctly indebted.
1.3 Evaluation of most appropriate source of finance
It has been analyzed from the overall financial statement of the company Clariton Antiques
LTD that for maintaining efficient business operation the company requires funds as well as
resources in order to delineate proficient selling and distribution perspectives. Thus most
appropriate as well as useful source of finance of the company has been uttered from the
perspectives are the invested capital accumulated by the company. This can be resembled as
the feasibility perceived from the balance of the share capital that the company has induced to
start up the business. It can be said that the it is quite obvious for determining the share
capital as the effective source of finance which have been utilized to operate the overall
business. Other than this, the accumulated profit of the firm assumed can be considered as
one of the most effective source of finance so as to ensure better proficiency in executing the
business feasibilities.

Task 2
2.1 Analysis of cost for the sources of finance
The reasonable wellsprings of assets for the business are recorded beneath:
Individual reserve funds:
Advantage: There is no compelling reason to pay any intrigue
Disadvantage: In the wake of contributing the whole sum, there is less change to get the cash
recuperated.
Offer of advantages:
Advantage: Selling the advantages is a financially well informed wellspring of back.
Disadvantage: The business person needs to pay more in contrast with the acquired assets.
Obtaining from family, relatives and companions:
Advantage: The intrigue add up to be paid is practically insignificant.
Disadvantage: After a predefined time, the interests and the foremost sum should be
reimbursed.
For beginning up a organization, the business person must have a thought in regards to the
cost and duty impacts for each wellspring of assets.. The related expenses with the
wellsprings of back are examined underneath:
Individual funds:
The businessperson must pay the obtaining costs
The company should record every one of his profits from the individual investment funds in
view of the IT Demonstration
Offer of benefits:
For the home loan or offer of settled resources, the business visionary needs to pay the
evaluation expenses, credit charges, title charges, moneylender expenses and the protection
and duty sums. The business person needs to pay a high measure of legitimate expenses for
moving toward his shut ones The costs identified with approach family; relatives and

companions are consistence costs, cost suggestions, intrigue instalments on the value offers
and the cost of commitment
2.2 Explanation for justifying the importance of financial planning
Planning the financial activities is the way toward assessing the capital required and deciding
it's opposition. It is the way toward encircling budgetary approaches in connection to
acquirement, speculation, and organization of assets of a venture. Deciding capital
prerequisites will significantly rely on components like cost of present and settled resources,
limited time costs and long extend arranging. Capital prerequisites must be looked with both
viewpoints: here, now, as well as for the long haul basis overall necessities. Deciding capital
structure continues through the capital structure is the organization of capital, i.e., the relative
kind and extent of capital required in the business. This incorporates choices of obligation
value proportion both here and now and long haul. Confining money related approaches as to
money control, loaning, borrowings, and so forth. A back director guarantees that the rare
monetary assets are maximally used in the most ideal very in any event cost keeping in mind
the end goal to get greatest rates of return. Money related Arranging is procedure of
surrounding targets, arrangements, strategies, projects and spending plans with respect to the
budgetary exercises of a worry. This guarantees viable and satisfactory money related and
speculation arrangements. The significance can be illustrated as that the sufficient assets must
be guaranteed. Planning the financial activities helps in guaranteeing a sensible harmony
amongst outpouring and inflow of assets so dependability is kept up. Budgetary Arranging
guarantees that the providers of assets are effectively putting resources into organizations,
which practice money related arranging. Budgetary Arranging helps in making development
and extension programs, which helps in long-run survival of the organization. Planning for
the financial activities lessens vulnerabilities concerning changing business sector patterns,
which can be confronted effortlessly sufficiently through assets. Planning the financial
activities helps in lessening the vulnerabilities, which can be an obstruction to development
of the organization. These aides in guaranteeing soundness all the benefits from the projected
advertisement that are in concern. Overtrading can be easily perceived through effective
decision-making procedures so as to ensure the feasibility of achieving the projected
significance derived from the sales of the company. The purpose of determining excess sales
through proper input from the workers will positively ensure overtrading procedure with
effective financial planning.

2.3 Assessment of information that will be needed on financing the takeover
From the perspectives of determining the overall justification adhered through the perception
considering the value of financing made through taking over the business will be considered
as much more efficient for determining the application of business. It can be said from the
perspectives that the financing accumulated from the takeover has intended the perspectives
from the respective partners, venture capitalists, and also financial broker. Thus from the
determining activities it can be judged that from the perspective of partners it can be followed
through the significance of providing partnership as he has financed some of the operations in
order to secure business operation. As much consideration regarding the investment will be
termed as the significance of giving the stake to the respective partners of the firm. A part
from this, the venture capitalist like We Finance Limited has always affability to gather the
finance and will surely accumulate at certain percentage of stake. This is quite inevitable to
generate the feasibilities in order to pertain efficient fund flow in the company so as to induce
financial operation effectively. Numerous Chiefs accept that hierarchical structure the crates
and lines on and organization outline is a key determinant of money related execution. Like
officers, they see their occupation as putting the correct accumulation of troops in the correct
spots. On the off chance that the fight is about development, for instance, then the President's
obligation is to make the ideal structure for directing assets towards advancement. This
conviction clarifies why redesigns are so mainstream with chief executive officers. Truth is
told, about portion of all chiefs dispatch a report amid their initial two years at work. Some
manage rehashed restructurings. The prompt intentions change. Some are about cutting costs;
others are about advancing development. Some are about shaking up a culture; others are
about moving key core interest. Whatever the specifics, however, reports quite often include
rolling out major auxiliary improvements in quest for better execution. Regardless of the
justification that more often than not welcomes them, in any case, most redesigns crash as
well as burn. A current bain and organization investigation of reports approximately 2000 as
well as 2006 found that less than 33% delivered any important change in execution. Most had
no impact, and some really demolished esteem. Chrysler, for example, rearranged its
operations three circumstances in the three years going before its chapter 11 and possible
blend with Fiat. Each time, officials declared that the organization was on another way to
gainfulness. Each time, execution did not progress. It can be trusted that this disappointment
is established in a significant misconstruing about the connection amongst structure and
execution. As opposed to mainstream thinking, execution is not decided exclusively by the
nature, scale, and mien of assets, essential however, they might be. An armed force's

prosperity depends at any rate as much on the nature of the choices its officers and warriors
make and execute on the ground as it does on real battling power. A partnership's structure,
comparably, will deliver better execution if and just in the event that it enhances the
association's capacity to settle on and execute key choices preferable and quicker over
contenders. It might be that the key need for your organization is to end up distinctly more
inventive. All things considered, the revamping test is to structure the organization so that its
pioneers can settle on choices that create increasingly and better advancement after some
time. For most organizations, this requires a principal reconsidering of their way to deal with
rearrangement. Rather than starting with an investigation of qualities, shortcomings,
openings, and dangers, basic changes need to begin with what we call a choice review. The
objectives of the review are to comprehend the arrangement of choices that are basic to the
achievement of your organization's procedure and to decide the authoritative level at which
those choices ought to be made and executed to make the most esteem. In the event that you
can adjust your association's structure to its choices, then the structure will work better, and
your organization's execution will make strides.
2.4 Explanation for the impact perceived on the financial statement
The perception followed by the company Clariton Antiques Ltd has succumbed that two
interventions could be justified so as to delineate the financing application for the firm. It can
be exclaimed that the financial statement of the company can be influenced through the
perception revealed from the different perception gathered in the respective financial year.
Though the current feasibility has generated the purpose about the company is whether taking
the help of financing from the venture capitalist or the financial broker. From the eventual
consideration the two adjustments can be treated in an another way. From the aspects of the
venture capitalist, it can be said that the noncurrent liabilities of the firm will be increased
and the interest for the borrowings will be determined through the perception regarding all
the different consideration. Therefore, it can be said that the percentage of stake given to the
respective venture capitalists has to be accumulated as the stakeholder’s equity. On the other
hand, for the aspects of the finance broker, the broking charges has been encapsulated in the
income statement as probable expense of the company in the respective financial year.
Therefore, from both the ways of determining the progression it can be said that the efficacy
has been presumed with the determination through the impact perceived from the financial
statement that the business propagation would adhere lesser amount of revenues in order to
pertain efficiency for the company. Though the feasibility has taken into considerations, it

can be easily judged that the purpose of enhancing the business will be determined with the
help of understanding the exact consideration regarding the purpose of understanding the
balance. Back are the purpose behind explanation regarding finances. Without money related
data, monetary explanations cannot be made. Speculators utilize this data to settle on choices
about putting resources into a business. Term loans, contract buys, debentures, rents, as well
as investment can be recognized as the obligation financing methods. In the instance of term,
credits, contract buys, debentures, leases, and existing responsibility for organization may not
be weakened. The overall rights regarding voting has been enabled with the value holders
despite the fact that the organizations raise back through previously mentioned sources.
Intrigue instalments on debentures and term credits are assessment deductible and obligation
holders do not have any controlling force in the organization.
Task 3
3.1 Preparation of Cash Budget
In this particular section, the overall analysis regarding the cash budget of the company
Clariton Antiques Ltd has been delineated so as to understand the feasibility for determining
the surplus as well as deficit of the of the company.
Cash Budget
PARTICULARS Jan Feb Mar Apr May Jun
(AMT in £)
Receipts:
Balance b/d 110000
Cash Receipts 15000 22500 30000 15000 15000 3750
Collection from Debtors 142500 262500 405000 547500 330000 285000
Payments:
Payment to creditors 807250 137250 119750 437250 227250 219750
Total Payment 807250 137250 119750 437250 227250 219750
Deficit / Surplus -539750 -392000 -76750 48500 166250 235250

Total Receipts 267500 285000 435000 562500 345000 288750
From the overall analysis, it has been delineated from the fact that the overall justification has
been done to assess the overall cash of the company. From the overall budget, it has been
ascertained that the considering the six months sales and purchase, first three month of the
company has achieved a deficit balance whereas, starting from the month of April the
company has secured surplus balance which reveals that the company has efficiently entailed
business operation through sales and purchase.
3.2 Perception gathered for determining the Unit Cost
Generally, the companies that are pertaining the activities through production have affability
to determine the unit cost through the variable and the fixed cost. However, the company
Clariton Antiques Ltd has uttered from the propagation that the business operation entailed
are justified from the fact of maintaining the balance that can be justified through the
significance irrespective of production procedure. Thus incessantly it can be justified from
the fact that it is quite obvious that the company Clariton Antiques Ltd will successfully
judge the unit price without any kind of hesitation. The overall fixed cost and the variable
cost has been assessed with the viability of the total purchase made and also the sales made
by the company. Now the margin of unit can be determined with the help of the overall profit
percentage that can be calculated through the percentage acquired from the fixed cost and the
variable cost. Thus, it can be easily said that the determination will be perceived all along the
total percentage as 100 and thus the feasibility can be achieved.
3.3 Investment Appraisal

Year PVIF @
14 %
Investment 1
(£ M)
Investment 2
(£ M)
Discounted
PV of
Investment 1
(£ M)
Discounted
PV of
Investment 2
(£ M)
0 1 8.6 4.4 8.6 4.4
1 0.8772 1.6 0.8 1.40352 0.70176
2 0.7695 2.8 1.4 2.1546 1.0773
3 0.675 3.4 2 2.295 1.35
4 0.5921 3.6 2.4 2.13156 1.42104
5 0.5194 4 2.6 2.0776 1.35044
6 0.4556 4.2 2.6 1.91352 1.18456
From the overall analysis, it has been ascertained that the significance regarding the
assessment of investment appraisal has been done propounding the criteria of net present
value, payback period and average of return. Thus, the calculation has been showcased
underneath:
Net Present Value:
For Investment 1 = 1.40352 + 2.1546 + 2.295 + 2.13156 + 2.0776 + 1.91352 – 8.6 = 1.97228
For Investment 2 = 0.70176 + 1.0773 + 1.35 + 1.42104 + 1.35044 + 1.18456 – 4.4 = 2.6851
Pay Back Period:
For Investment 1:
Year
Investme
nt 1 (£
M)
Cumulati
ve Cash
Inflows
1 1.6 1.6
2 2.8 4.4
3 3.4 7.8
4 3.6 11.4
5 4 15.4

6 4.2 19.6
From the overall calculation it can be said that the overall payback period for the investment
1 has been assessed at less than 3.5 years and can be also said that have been valued at 3.25
years.
For Investment 2:
Year
Investm
ent 2 (£
M)
Cumulati
ve Cash
Inflows
1 0.8 0.8
2 1.4 2.2
3 2 4.2
4 2.4 6.6
5 2.6 9.2
6 2.6 11.8
From the overall calculation, it has been perceived that the payback period for the investment
is considered 3.125 years.
Average Rate of return:
For Investment 1:
Considering the initial investment at 8.6 million £ by using the cash flows for six years, it can
be easily said that the average rate of return will be:
Sum of the returns = 1.40352 + 2.1546 + 2.295 + 2.13156 + 2.0776 + 1.91352 = £ 11.98
Average Returns = £ 11.98 / 6 = £ 2.00
Therefore, the average rate of return will be = (£ 2.00 / £ 8.6) * 100 = 23.26 %
For Investment 2:
Considering the initial investment at 4.4 million £ by using the cash flows for six years, it can
be easily said that the average rate of return will be:

Sum of the returns = 0.70176 + 1.0773 + 1.35 + 1.42104 + 1.35044 + 1.18456 = £ 7.09
Average Returns = £ 7.09 / 6 = £ 1.18
Therefore, the average rate of return will be = (£ 1.18 / £ 4.40) * 100 = 26.82 %
Comparative Analysis
From the overall analysis, it can be said that both the investments cannot be selected as the
criteria of having net present value and average rate of return of valuating £ 2 million and
35% respectively have not been fulfilled. From the calculation, it has been perceived that
from investment 1, the net present value has not been fulfilled and from the perspectives of
average rate of return, it has not been fulfilled accordingly. Nevertheless, the valuation of
investment 2 has fulfilled all the two significance like the net present value and pay back
period but in the mean time, the overall valuation considering the average rate of return has
not been fulfilled. Therefore, the company Clariton Antiques Ltd for any kind of investment
appraisal has selected no investments policies in order to secure effective business
propagation.
Task 4
4.1 Discussion of Key Components of financial statements
Financial statement of every company has to be encapsulated so as to understand the financial
position in each of the financial year. Considering the derivatives, it can be easily said that
there are some of the instances that has leaded the aspects of justifying the consequences to
ensure the purpose of delineating different statements that are as follows:
Incomes statement has been considered as the statement, which has helped to understand all
the income as well as the expense made by the company. In order to cumulate this
justification, it can be easily said that the purpose has been determined with the help of
identifying the sales made in a financial year in respect with the total amount of cost of goods
sold by the company. However, it has been generated from the point of view to deliver the
justification, consequences of making identification of overall profit for the year can be
understood.
Statement of cash flow helps to evaluate the overall cash balance of the company with subject
to the total number of cash paid for pertaining the business operations. The cash flow helps to

determine several activities performed for maintaining business operations. It can be said that
the efficiency in consolidating the valuation has determined through operating activities,
investing activities and financing activities of the firm.
Statement of changes in equity has been entailed so as to understand the change made in the
financial statement in each of the financial year. The overall adjustments made in accordance
to the variation valued so as to ensure the aspects of borrowings, dividend as well as different
propagation of controlling the assets as well as the equity of the company.
Statement of financial position helps to determine the financial position of any company for a
particular period of time. It can be judged from the perspectives of a year, a month and also
for a day. The statement of financial position can be characterized through the justification of
total assets as well as the liabilities of the company. This has always eventually segmented
the position of the business effectively in order to justify the propagation of identifying the
feasibilities.
Notes to the financial statement helps to identify the significance of all the accounting heads
assessed in order to execute the financial decisions effectively. In order to pertain this
particular decision, different significance has been ascertained in order to delineate the
justification for identifying the application of executing all the feasibilities effectively.
4.2 Comparison of the format Presented by the company Clariton Antiques Ltd and
sole trader business for the financial statements and
It can be stated that from the financial statement presented for the company Clariton Antiques
Ltd and any other sole proprietor business has significantly pertained that both the financial
statement are same. The amount of profit in the income statement has been calculated in a
feasible way and the statement of financial position has been determined through assets as
well as liabilities. Thus quite efficiently the determination has been made to cumulate all the
significance of maintaining and recording the accounts of the company.
4.3 Interpreting the financial ratio of the company Clariton Antiques Ltd
The overall financial ratio of the company Clariton Antiques has been determined with the
help of different accounting balance calculated underneath:
Profitability:

Net Profit Margin = (Net Profit / Net Sales) * 100
2015 2016
Net Profit 23 33
Net Sales 1220 1255
Net Profit Margin 1.885246 2.629482
The profitability of the company can be determined with the net profit margin. From the
calculation, it has been assessed that the company has increased the profitability in the
financial year 2016. Thus from the aspects it can be understand the viability of underpinning
the effectiveness of the company has been entailed in the year 2016 with good justification in
order to strengthen the feasibility in business.
Liquidity:
Current Ratio = (Current Assets / Current Liabilities)
2015 2016
Current Assets 71 105
Current Liabilities 36 20
Current Ratio 1.972222 5.25
The liquidity ratio has been calculated with the help of determining the liquid balance of the
company through current ratio. It can be said from the perspectives of accounting principles
that the current ratios have to be valued at 1.5 times for any company. But for Clariton
Antiques Ltd, it has been cumulated much more higher than the respective valuation. This has
significantly considered as one of the most inevitable purpose of determining the application
of deriving the assessment regarding all the purpose of generating the liquid balance of the
company. In the financial year 2015 it has been valued at 1.97 but in the financial year 2016
it has been valued at 5.25 which entails that the valuation is highly efficient for the company
to operate the business successfully.

References
Dyson J R, (2007), Accounting for Non-Accounting Students. Financial Times/Prentice Hall.
ISBN: 9780273709220
Atrill, P. (2012), Financial Management for Decision Makers. 6th Edition, Harlow: Pearson
Financial Times/Prentice Hall.ISBN: 9780273756934
Atrill, P. and McLaney, E. (2013), Accounting and finance for non-specialists.8th ed.Harlow:
Financial Times/Prentice Hall. ISBN: 9780273778035
Watson,D. and Head, A. (2012), Corporate Finance Principles and Practice. 6th edition,
Harlow:Pearson ISBN: 9780273762874