Report On Identification Of Sources Of Finance For Sweet Menu Restaurant

Added on -2020-02-14

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Table of ContentsINTRODUCTION................................................................................................................................3TASK 1.................................................................................................................................................31.1 Sources of finances available.....................................................................................................31.2 Implication of the sources..........................................................................................................41.3 Evaluation of most appropriate sources. ...................................................................................6TASK 2.................................................................................................................................................62.1 Analysing cost of different sources............................................................................................62.2 Importance of financial planning...............................................................................................72.3 Assessment of information needs of decision makers. .............................................................72.4 Impact of identified source of finance.......................................................................................8TASK 3.................................................................................................................................................83.1 Analysis of the budget and proposed recommendations............................................................83.2 Calculations of Unit cost and pricing decisions.........................................................................93.3 Assessment of the projects through investment appraisal techniques.......................................9TASK 4...............................................................................................................................................114.1 Discussion on the financial statements....................................................................................114.2 Comparison of different financial formats...............................................................................124.3 Ratio analysis...........................................................................................................................12CONCLUSION..................................................................................................................................13REFERENCES...................................................................................................................................14
INTRODUCTIONFinancial resource plays a vital role for the development and smooth operations of abusiness. They are the core pillars for establishing any business and making it a success. It is veryimportant for the business to manage financial resources available to the enterprise in effectivemanner. A business requires financial assistance at various steps (Keller, 2013). Decision making isone among the different steps. The financial manager requires finances while planning orimplementing the decision into the firms. Financial funds available to the business must be usedvery appropriately and the manager must examine the return on investment being generated. The current report is on identifying available sources of finance available to Sweet MenuRestaurant. As the restaurant is doing well in terms of profitability, the owners are planning forexpansion to two new locations; one being in Central London and the other in Croydon. The financemanager has acquired few choices to raise funds for the business. For this, an in-depth assessmenthas been done by the manager to ascertain the feasibility of choices of finances (Kil, 2013). Theother part of the report discusses about raising budget for Blue Island Restaurant. Directorsunderstand the relevance of budget and cost as they have less knowledge about financial planning.Thus, to evaluate the sources and choices available to both the businesses, various techniques havebeen used which are discussed in the report.TASK 11.1 Sources of finances availableSweet Menu restaurant is planning to expand its business to two new locations, the businessrequires identifying available sources of finances. They are as follows-Long term sources of financeShare Capital- Share capital signifies sharing of ownership rights to a business or company.They are considered as a cheaper mode as compared to shares. The share holders ave a equalright in the decision making of the company.Debentures- The company can also raise capital with the help of debentures (ExternalSource of Finance / Capital, 2016). The company does not have to share its control with thedebenture holders and in return only have to provide them with timely dividends. Retained Earnings- A portion of income is reserved by the organisation which is known asretained earnings. Instead of distributing dividends among the investors, the organisation
may decide to hold the income in order to retain the earning for future use. It is easier for thebusiness to reinvest retained earnings to his/her company.Loan- A loan may be lended by a bank or a financial institution or by a friend and relative(Sources of finance, 2012). Loan seekers require paying for a security in terms of getting theloan approved. The security is kept in hold with the loan giver. Seeker of the loan will haveto pay the principal amount along with the interest amount. Loan can be used for purchasingassets or inventory for the company. Venture funding- The venture capitalist are investors who invest in a business by examiningits feasibility. They tend to acquire stocks or ownership in the business. They are generallythose people who have a set of money but they do not know as to where to invest it(Financial ratio and Analysis, 2013). Thus, they tend to find potential start-ups or businessthat has high potential for generating profitability.Short term sources of financeHire Purchase/ Leasing- Hire purchase is a short term loan, as the business would have toreturn principal amount in the form of instalments. Purchaser purchases certain goods ormachinery in the form of hires purchase but can repay the amount on instalment basis(Managing financial resources, 2014). In leasing, business rents a property or equipmentfrom the lessor under contractual agreements. For example, the restaurant can leasecomputer or microwave oven for a set period of time by paying amount in instalment.1.2 Implication of the sourcesSourcesShare Capital/DebenturesRetainedEarningsLoanVentureCapitalHirePurchase/LeasingLegalImplicationsThe companyhave to clearlystate the factrelatedtoshares anddentures underalegalstatement(Ryan, 2009).This is to avoidanylegalTheshareholdersmay not agreetoretainearning of thecompany as itmay restricttheir right toreceivedividends. The companyhave to makesuretounderstand allthe terms andconditionprovided bythe bank orfinancialinstitution.They also haveTheorganizationwill have tomake sure todulyunderstand thedemands of theventurecapitalistbefore makingany contractsThe lessor orthe owner maytakelegalactions againstthe company(Brealey,2012). If thebusiness is notable to pay forthe instalmentamount on the

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