Report On Sainsbury - Sources Of Finance | Decision Making

Added on -2020-02-14

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Table of ContentsINTRODUCTION...........................................................................................................................4TASK 1............................................................................................................................................41.1 Sources of finance available for ABC Company.............................................................41.2 Implications of different sources of finance.....................................................................41.3 The most appropriate source of finance for ABC Company............................................52.1 The cost of different sources of finance...........................................................................62.2 Importance of financial planning to ABC Company.......................................................72.3 Assess the information needs of different decision makers of ABC Company...............72.4 Impact of finance of financial statements.........................................................................83.1 Cash Budget for ABC Company.....................................................................................83.2 Calculation of per unit cost and pricing decisions............................................................93.3 Viability of the investment project of ABC Company.....................................................9TASK 2..........................................................................................................................................104.1 Discuss the main financial statements of ABC Company..............................................104.2 Comparison of financial statements ..............................................................................114.3 Financial Ratios of Sainsbury PLC................................................................................11CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................13
Index of TablesTable 1: Cash Budget of ABC Company.........................................................................................8Table 2: Sales Budget......................................................................................................................9Table 3: Unit cost centre of ABC Company....................................................................................9Table 4: NPV calculation...............................................................................................................10Table 5: IRR and Payback table.....................................................................................................10Table 6: Ratio comparison of Sainsbury PLC...............................................................................12
INTRODUCTIONSmall and medium size businesses have grown significantly in UK. The government isplanning to spend more than £12 billion for the development of small scale business in thecountry. This has provided an amazing opportunities for the nation's diverse and newly set upbusinesses. The report is based on the process of assessment of available sources of finance, theirimplications and decision making. The contract is for website hosting and development for ABCCompany (Website Hosting and Development, 2013). Apart form this, the evaluation of financialperformance of J Sainsbury Plc has also been included in the report. TASK 11.1 Sources of finance available for ABC CompanyEquity: ABC Company can generate £ 280,000 from equity share capital. It will dilutethe control of the company but it will help them to grow their business. The shareholders mayinterfere in the in the day to day operations of the company which can be a problem (Kaplan andAtkinson, 2015). Debentures: The cost of raising funds from debentures is very low and ABC Companycan easily generate £ 280,000 through it. It will increase the debt obligation of the company andthey have to pay regular interest to debenture holders (Ledgerwood, 2014). Loans: Bank loans provides longer term finance for the business. ABC Company has toprovide a collateral security and they have to pay regular interest even if there are no profits. Hire purchase: Hire purchase is a contract in which the owner has to pay regularinstalments and he has an option to purchase the asset at the end of the term (Lusardi, 2011).ABC Company can hire the assets required for the business. It will help them to grow theirbusiness. Reserved profits: ABC Company can accumulate their profits and use it for the growthof the business. It won't affect the control of the company as there will be no external influence. 1.2 Implications of different sources of financeThe implications of different sources of finance for ABC Company is as follows:Sources offinanceAdvantagesDisadvantageEquityNo interest paymentsThey can get help from the Dilution of controlHigh cost in raising capital

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