Financial Statement Analysis & Management

Managing Financial
Resources

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
1.1 Sources of finance.................................................................................................................4
1.2 Implications of the different sources.....................................................................................4
1.3 Appropriate sources of finance.............................................................................................5
2.1 Cost of different sources.......................................................................................................5
2.2 Importance of financial planning..........................................................................................5
2.3 Information needs of different decision makers....................................................................6
2.4 Impact of finance on financial statements.............................................................................6
3.1 Cash budget for the business entity.......................................................................................6
3.2 Calculation of Unit Cost........................................................................................................7
3.3 Viability of a project by using the investment appraisal technique......................................8
TASK 2..........................................................................................................................................11
4.1 Different financial statements.............................................................................................11
4.2 In the different type of business have to use different financial statements.......................11
4.3 Interpretation of financial statements using appropriate ratios by using internal and
external ratios............................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management of finance is necessary in each and every company as it helps in attaining
the goals and objectives. Financial management includes the different functions that is planning,
organising, controlling along with the monitoring of the financial resources so that they can
achieve the organisational objectives (Arthur, Cheng and Czernkowski, 2010). For managing the
different financial resources they have to make proper and appropriate plans which succour in
managing the standard of the business entity in the different market. They have to utilise
appropriate resources in managing all the operational activities so that they can attain the targets
as well as success in the market place at the time of high competition (Financial Resource
Management, 2016). The present report is focused on J Sainsbury PLC which is a largest
supermarket in UK. In the below mentioned report, discussion based on the different sources of
finance. Along with the calculation of cost so that product should be sell efficiently.
TASK 1
1.1 Sources of finance
In any business finance is very important thing and there are various ways through which
it can be collected and those are known as sources of finance. Finance can be obtained for short
term or long term as per the requirement (Bennouna, Meredith and Marchant, 2010). There are
basically two main sources of finance available on the basis of source of generation which are
internal sources which are found inside the business and second one is external sources of
finance which are found outside the J Sainsbury PLC.
Internal sources of finance:- These are those sources which are obtained from insides of
business. Some of the internal sources are retained earnings, controlling or reduction of working
capital, and sale of assets etc.. owned capital and internal sources have same characteristic. The
main advantage of these sources are that for them dependence on outside party is not required
(Bodie, 2013).
External sources of finance:- the sources which are to be obtained from outside. Some of them
are loans, debentures, hire purchase grants etc.
1.2 Implications of the different sources
There are various sources of finance and they have different implications of them.
Implication may be positive or negative. In case of loans it is that the amount to be repaid at

intervals is fixed and the bank cannot demand it anytime. But it also has a disadvantage that it
carries a interest rate and also some special fees is added in case any covenant is broken and
some legal cost are to be incurred (Bradbury, 2011). Than comes the securities which is a
financial instrument issued by the J Sainsbury PLC and can be traded. It includes loan stocks,
debentures, etc. and they have a fixed rate of interest and they can be converted into ordinary
shares. Then comes the Equities which is known as the finance with least risk. In this investors
will earn more return if they take more risk that is higher the risk higher will be the return
(Financial Resources Management (FiRM), 2017).
1.3 Appropriate sources of finance
For choosing the source of finance it should be considered that we choose the most
appropriate source for which there are various factors which are to be considered. Some of the
factors are cost in which two things will have to be considered that is the cost incurred for the
procurement of the funds and also the cost which will be required for its utilisation. Then the
purpose and the time period for which it is to be acquired should be considered (Carballo-Penela
and Doménech, 2010). Finance required for a short period of time can be borrowed through trade
credit on which rate of interest is low and the funds which are required for long term shares or
debentures can b considered as they will be more appropriate for it. Next is the form of the
organisation and its legal status as in case of J Sainsbury PLC it can rais funds with the help of
issuing shares.
2.1 Cost of different sources
in order to avail different different sources of finance there is a need to incur various cost
in order to get them. As in case of a loan that is taken from any bank J Sainsbury PLC will have
to pay interest at the rate specified in the agreement and also if any default is made in the
procedure then additional charges will also be required to be paid. Then next in case of equity
that is share issued by J Sainsbury PLC it will required to pay the dividend to the shareholders at
a specified rate from its earnings and there should be no default made in context of it (Collier,
and et. al., 2010). In case of debentures also J Sainsbury PLC will have to pay certain interest at
the pre defined rate. Due to all this internal sources are considered somewhere better as in case of
that such as retained earnings there will be no extra cost that will be required to be incurred.