Sources Of Finance - Sweet Menu Restaurant Assignment

MANAGING
FINANCIAL
RESOURCES AND
DECISIONS

Table of Contents
INTRODUCTION......................................................................................................................1
TASK 1......................................................................................................................................1
AC 1.1 Sources available to the business organizations.......................................................1
AC 1.2 Implication of internal and external finance sources................................................2
AC 1.3 Most appropriate source of finance for Sweet Menu Restaurant..............................3
TASK 2......................................................................................................................................4
AC 2.1 Cost of identified appropriate finance source for Sweet Menu Restaurant..............4
AC 2.2 Importance of financial planning for the Sweet Menu Restaurant for their new......4
business plan..........................................................................................................................4
AC 2.3 Information needs of different decision makers in Sweet Menu Restaurant business
...............................................................................................................................................5
AC 2.4 Impact of finance sources in the business financial statements................................6
TASK 3......................................................................................................................................7
AC 3.1 Analysis of budgets and take appropriate decision...................................................7
AC 3.2 Calculation of unit costs (meal cost) and take pricing decisions..............................8
AC 3.3 Using investment appraisal techniques to know the project viability.......................9
TASK 4....................................................................................................................................10
AC 4.1 Main financial statements produced by the organization........................................10
AC 4.2 Appropriate formats of financial statements for different type of businesses........11
AC 4.3 Interpretation of financial statement using ratio analysis method..........................15
CONCLUSION........................................................................................................................16
REFERENCES.........................................................................................................................17

INTRODUCTION
Success of business depends greatly upon the availability of finance. The amount of
cash available for spending in business is termed as finance. There are number of sources
available to the business organizations to mitigate their financial need. It can be fulfilled from
the sources that are available internally in the organization. Moreover, outside sources also
can be used for such purpose. In this report, financial sources are identified for a reputable
Restaurant company named Sweet Menu Restaurant. The Restaurant is operating in Gants
Hill in East London founded before 10 years ago. This Restaurant has a good corporate
image and well known position in the market as it serves various types of inter-continental
foods at fair prices. Now, company’s owner desires to expand their business by opening its
branches in Central London and Croydon. Therefore, the present report helps in determining
the available financial sources, their implication as well as advantage and disadvantage for
the company. Furthermore, the report will explain that how managers can take efficient and
strategic decisions to manage these sources.
TASK 1
AC 1.1 Sources available to the business organizations
Financial sources are categorised into two that are internal and external. Internal
financial sources comprise the sources that are available in the business whereas external
finance sources include the sources that can be taken from the outsiders.
Type of Internal sources Description
Angel investors
Under this type of source, business can take loans
from their friends and relatives. Business owner can
get funds from their friends and relatives for different
time period at cheaper interest rate that helps to
eliminate or minimize the financial needs.
Retained earnings and profits of other
business
Balance of business profit which is not distributed as
dividend is called retained earnings (Broadbent and
Cullen, 2012). All the corporations can use this
source for fulfilling their financial need. Along with
the retained earnings, owner also can use profit of
their other businesses.
Owners personal savings Personal savings of the owner can also be used as a

financial source for the expansion of business. It is
mostly used in case of newly business organization
when outside sources are available in very less
amount.
External sources Description
Issuing shares
There are two types of shares that are
ordinary and preference share capital.
Business can issue these shares in the market
in order to get funds easily.
Borrowed funds
Bank loan is the most common source of
borrowed funds (Thomas, 2001). Bank gives
loans to the corporate sectors for a specified
time period at an implied interest rate.
Lease
Under the lease financing, business can attain
rights for using assets without having
ownership (Brayley and McLean, 2001). It is
a contract between the asset’s owner and user
that provides rights for the use of assets at a
rental charges.
Venture capital
Venture capital can be acquired in the highly
potential growth earning businesses. Venture
capitalists are much interested to invest in
such businesses that can provide higher
returns to them and fulfil long term business
requirements.
AC 1.2 Implication of internal and external finance sources
Internal sources Implications External sources implications
Angel Investors: Borrowing loans from Issuing shares: On the amount of equity