Firm Size and Profitability in Turkey
Added on 2020-01-16
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Managing financialresources1
TABLE OF CONTENTSIntroduction......................................................................................................................................3Task 1...............................................................................................................................................31.1 Identify the sources of finance available to a business..........................................................31.2 Asses the implication of the different source of business identified.....................................41.3 Appropriate sources of finance for a business project...........................................................52.1 Analyze the cost of each sources of finance which is identified...........................................52.2 Explain the importance of financial planning........................................................................52.3 identify and assess the information need of internal and external decision maker................62.4 Explain the impact of finance on the financial statement......................................................63.1 Project cash and other budget and analyze this projected budget..........................................73.2 The calculation of unit cost for the new project and make pricing decision........................73.3 Assess the viability of chosen contract by using different appraisal method........................8Task 2...............................................................................................................................................94.1 Discuss the main financial statement by explaining their purpose and uses........................94.2 Compare the format of main financial statement for different type of business.................104.3 Interpret financial statement of a Marriott hotel .................................................................11Conclusion ....................................................................................................................................13References......................................................................................................................................142
INTRODUCTIONAn effective and efficient management of funds in a such a manner through whichcompany objective is achieved on time is known as financial management. This function isdirectly associated with the top management. Present report is based on a XYZ company, whichis launching a new project. A new project which is launch by a company is demanding andrewarding for the organization. In a Present report, the different sources of finance is identifiedfor a new project. Along with this, the main financial statement and their purpose is discussed.Apart from that, the cost of different sources of finance is analyzed.TASK 11.1 Identify the sources of finance available to a business.According to the given scenario, XYZ company want to launch an ambitious businessproject which is a demanding and rewarding. For a new project company need to identifydifferent sources of finance.There are two type of sources of finance long and short term that are discusses belowEquity share: Equity share are known as ordinary share and it is a common sources offinance for any organization (Agarwal, Amromin and Evanoff, 2015). XYZ company can issueshare and then sell them on the stock exchange, to raise cash for a new project. Retained profit; Retained profit is a profit which is company own money. (Dorfmanand Cather, 2012). If company used profit for launching a new project then they no need to payinterest. Further it avoid the possibility of a change in control resulting form an issue of newshare. Bank loan: Bank loan is appropriate source of finance for XYZ company. There is somelegal formalities which company need to fulfill before taking a loan from a bank. Further, bankcharge some specific amount of rate of interest form company. In addition to this, bank also keepsome security deposit, so that in any case if company fail to pay loan amount, bank can re-payedloan form a security deposit.Bank overdraft; It is a short term source of finance which a business need for a day today requirement. However, XYZ company need to pay a high interest on bank overdraft within agiven period of time.3
1.2 Asses the implication of the different source of business identifiedThere are some implication of sources of finance which are identified, this all significance arediscussed belowSource offinanceLegal costFinancial costbankruptcyDilution ofcontrol Equity shareFor raising a fundfrom a equityshare companyneed to fulfill alots of legalformalities.In a equity sharecapital financialcost is dividendwhich companypaid to itsshareholder.There are lesspriority to a shareholder at the timewhen companybecomebankruptcy.Dilutionofcontrol in equityshare capitalshigh becauseshareholder havepower Retained profitIn a retainedprofit there is nolegal formalityrequired becausecompany is usinga money from itown profit.There is financialcostbecausecompany is usingit own moneyTheir is nopriority given to ashareholder atwhen companyuse a retainedprofitformstarting a newprofitTheir is lowdilution of controlBank loan At the time ofraising a fundfrom a bank thereis also some legalformalities whichneed to fulfillbefore getting aloan.Bankprovide loan to acompany afterchecking theirfinancial stability.There is somespecific amountof interest whichcompany need topay to loan. Ifcompanybecomebankruptcy thenbank re payed itsloan from asecurity deposit.There is a highpriority given to abank becausetheir loan is needto be payed In a bank loanthere is lowdilution of controlbecause there isinterfereofshareholderBank overdraftBank overdraft isa short term loanand company cantake it wheneverit required forraising a fund.In a bankoverdraftcompany need topay a high rate ofinterest to a bank In a bankoverdraft high isgiven to a bank,there overdraftamount is nee tobe fulfilled by theorganization ontimes.In a overdraftthere is also a lessdilution of control4
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