Report On UK Restaurant Business - Sources Of Finance & Implications

Added on -2020-02-05

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MANAGING FINANCIALRESOURCES
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1AC 1.1 Available sources of finance...........................................................................................1AC 1.2 Implication of different sources of finance.....................................................................2AC 1.3 Appropriate sources of finance for Restaurant...............................................................3AC 2.1 Cost of selected sources of finance.................................................................................4AC 2.2 Importance and uses of financial planning.....................................................................4AC 2.3 Information needed to different decision makers...........................................................5AC 2.4 Effect of finance on the financial statements..................................................................6AC 3.1 Cash budget for making appropriate decision................................................................7AC 3.2 Calculation of unit cost and pricing decision.................................................................8AC 3.3 Analysing the viability of investment project by using financial tools and techniques.8TASK 2..........................................................................................................................................11AC 4.1 Financial statements, their purpose and use.................................................................11AC 4.2 Comparison between different types of businesses......................................................11AC 4.3 Interpretation of financial statements through ratios analysis......................................12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................15
INTRODUCTIONFinance is the life blood for every business either it is small, medium or large.Establishment of any new business requires funds to start. The person who wants to setup hisown firm he needs to manage the appropriate financial resources. He will put his own investmentand remaining part will borrow. In this context, central government is promoting and providingfunds to the small business firms in UK. So, there is big opportunity for them who want to starttheir business at the small level. The present report is based on the restaurant business in UK.The requirement of fund is £300000 and the owner is having £20000 to invest into this business.The rest amount he has to arrange by loan. The report will provide information about sources offunds, implication of finance as a resource in the business, basis of financial decisions andevaluation of financial performance of the business.TASK 1AC 1.1 Available sources of financeThere are two sources available for small business like restaurant which are as givenbelow:Internal sources:Personal savings – First of all owners uses his personal savings for the new start-up. Thisis the safest source of finance because on this amount there is no obligation ofrepayment.. It is one of the easiest ways of finance. Investment through personal savingsmaintain the control over the business..Sale of asset – By selling own asset, finance can be arranged if possible. This option issuitable when there is surety that the business will successful.Family and friends – The second option which is available to the owner is borrow fromfriends and family. They will lend money for the business. The obligation of repay theborrow amount only. Generally, they do not charge interest on it. This option is onsecond priority to the owner.External sources:Bank loans – Most of the banks provide loan to the small businesses. The bank firstensures that the business is able to repay the loan amount(Sources of finance for a1
Startup or Small Business. 2015). If the business is satisfied with the business plan thenthey will lend money.Government grants – It is also safest way to borrow money. Like UK government will bepromoting small businesses and providing grants to them. This is helpful in starting anew business like restaurant. AC 1.2 Implication of different sources of financeSources offinanceFinancialimplicationsLegalimplicationsBankruptcyimplicationsDilution ofcontrol Personal savingsThere is nofinancial riskbecause it is ownfunds. But theopportunity costwill affect.There is no legalimplications.No chances ofbankruptcy in thissource of finance.The control willremain in thehands of owner.Sale of assetsThe cost occurs atthe time ofregistry. The right ofpossession andownership bothhave transferred.There is nobankruptcyimplications.There is nodilution of controlover business.Family andfriendsThere is nofinancial cost,unless they ask.There is no legalimplications.There is nobankruptcyimplications.The dilution ofcontrol may takeplace, if theywant.Bank loanThe cost ofinterest on loanamount has tobear.It is require tosubmit the copyof financialstatements anddocuments ofcollaterals, whenapply for loanfrom thebank(Elsom,In case ofbankruptcy of thebusiness thepriority is givento outsiders overinvestors.There is nodilution of controlover the business.2

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