Financial Planning Competency

The provided content, spanning from page 1 to 19, is a collection of various articles and books related to financial planning and management. The authors of these works include Board (2015), Brigham and Ehrhardt (2013), Consigli et al. (2015), Delgadillo (2014), Drury (2013), Graf et al. (2012), Grant (2016), Hershey et al. (2012), Huston (2015), Johnston and Marshall (2016), Kaplan and Atkinson (2015), Kingston and Weng (2014), Letellier and Eppich (2015), Letkiewicz et al. (2014), Michalski (2012), Swayne et al. (2012). The articles cover topics such as financial planning competency, optimization paradigms, risk-return profiles, financial literacy education, effective financial planning for retirement, agency theory, and recording and documentation of heritage places.

MANAGING FINANCIAL
RESOURCES AND
DECISIONS

TABLE OF CONTENTS
INTRODUCTION..........................................................................................................................................................1
TASK 1...........................................................................................................................................................................1
1.1........................................................................................................................................................................1
1.2 .......................................................................................................................................................................2
1.3 .......................................................................................................................................................................4
TASK 2...........................................................................................................................................................................5
2.1 .......................................................................................................................................................................5
2.2 .......................................................................................................................................................................7
2.3........................................................................................................................................................................7
2.4........................................................................................................................................................................8
TASK 3...........................................................................................................................................................................9
3.1........................................................................................................................................................................9
3.2 .....................................................................................................................................................................10
3.3 .....................................................................................................................................................................11
TASK 4.........................................................................................................................................................................14
4.1......................................................................................................................................................................14
4.2 .....................................................................................................................................................................15
4.3......................................................................................................................................................................15
CONCLUSION.............................................................................................................................................................17
REFERENCES..............................................................................................................................................................18

INTRODUCTION
Finance term mainly used in banking sector which helps in managing all the financial
activities such as banking, investment and various liabilities which helps to make the financial
system with the help of several financial devices. In the present report, Clariton Antiques Ltd has
been selected as it is founded by four partners five years ago as initially it was started as a
unincorporated business and after that they are growing and they are engaged in selling antique
items. The organisation already have two branches in London and bank want to establish new
branch in Birmingham so that they makes planning to acquire building for opening new
branch(Agarwal and et.al., 2015). This report covers the different sources of finance with the
assessment of the implications in order to use those sources in the business. Further, the elements
of cost which are considered in report along with the capabilities of business which are assessed
in order to apply different techniques of capital budgeting.
TASK 1
1.1
There is major role of finance in order to increasing the level of business with the help of
strengthening the capabilities of finance in an organisation. To make the appropriate
arrangements of finance is the main and essential part of the company and it works as a
backbone so that It plays an important role for the success of any business organisation because
finance is life line of any company(Albrecht and Steinrücke, 2016). There are several sources of
finance which may be internal or external. internal sources are Authorized capital, Profit,
Retained earning and cash reserve on the other hand external sources are loans from central
bank, deposits, Issue of debentures, bond and cash certificates which helps in to generate the
capital of the bank which is taken up by the Clariton Antiques Ltd that is described below:
Unincorporated business- It is a business that is owned and established by an individual or with
more people who have the unlimited liability for taking various actions of the business. There is
no separation between the owner and business because it is unregistered company no legal
documents are exists so that all the responsibility regarding to profit and loss to the owner. Both
of them have the similar identity and in this business there is some flexibility at the time of
dealing with taxes. Further, the owners of business as they can utilize the loss in business in
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order to decrease in the personal income(Board, 2015). There are some of the internal sources of
finance which is used by the owner for the improvement in the existing conditions of business
which are given below:
Venture Capital- It is a huge pool of funds that is managed by an organisation or a firm and
mainly used by the people who takes risk so that the external business owners ready to invest in
the business. With the help of business experts there is some of the amount provided by them so
that in return they stake a demand in the new entity. Thus, the amount which was provided to
those owners with the experts of business of the famed sector.
Hire purchase- For the purpose of fulfil the needs sole trader can also take help from the source
of hire purchase. In this, at initial stage they make down payment so that organisation can use
ownership of assets.
Incorporated business- It is a kind of business that offers many advantages aver the partnership
as it also involves the deduction in the additional taxes and the protection of liability. The
registration of the entity that is considered by the laws and it is counted as a legal identity so that
it is beneficial for them to operate in the business(Brigham and Ehrhardt, 2013).
Partnerships- It is the appropriate sources of finance in which the business can take the help of
external authorities through invest money in their business with the help of different partners.
The profitability of the business is decided by both parties with the mutual agreement.
Bank loan- For Clariton, they can also raise funds by approaching different banking institution.
In this, all of the legal formalities are required to be completed by the owner for generating
appropriate amount.
Factoring- The stated firm cal generate money through discounting of bills from banking
institution. For this there are certain charges taken by the financial institution.
1.2
In order to select the proper sources of finance that is important for the business and it
also have an impact on the conditions of the existing business. For the purpose of selecting the
appropriate sources is done with the help of considering all types of costs which involved in
order to use this source(Consigli, Brandimarte and Kuhn, 2015). Further, it is required to check
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the efficiency of the sources which helps to generate the economic benefits as the owner make
the investment for growing the business. There are some implications are present for the sources
of finance which is used by the owner of the business entity:
Aspect Partnerships Venture capital Bank Loan
Control All the partners of the
enterprise have their equal
rights with the terms and
conditions as they
mutually decide to form a
deed of partnership.
In this, the control is
imposed by the person
who is venture
capitalist and takes
part in the new
business and also
interfere in the
decision making of the
owner.
There is no
requirement to bring
changes in the
possession as a debt
holders and it does not
put any restriction on
the activities of
business.
Financial
Implication
There will be financial
investment through the
amount which is
generated as that it is
imposed in a enterprise
for capital and utilize in
order to meet the
expenses(Delgadillo,
2014).
This sources help in
the existing
capabilities of finance
for the purpose of
improvement in the
business. Thus, the
amount will also be
recorded for the
enterprise.
Interest in terms of
fixed or variable it is
considered as financial
burden of the loan.
Legal Implication It is legally authorized and
the people who make will
get advantage from the
side of government as
they consider both the
entities as same.
This source is
considered as a
legalized source but
the use of this sources
can not be recognize as
legal as they are
For secure lending
there is another
implication which is
collateral security of a
business.
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registered at law.
1.3
Partnerships
Advantages Legal agreement- There is legal agreement between both the parties as they are able to
produce the appropriate outcomes as their main aim is to tackle all the types of expenses
with the help of legal aspect. There is support by government to the business if there is
any default accepted by the partner.
 Financial support- The use of financial resources in the entity which helps t increase the
level and to form the different sources of finance so that it helps to increase in the growth
of business(DRURY, 2013).
Disadvantages Interest- The profit of the business equally share between all the business partners
according to the contractual agreement in case of absence of partnership deed there will
be legal authority which can interfere.
 Winding up - The partnership can be wound up in case of any default that is committed
by the partner a they can reject the existing business in order to operate that entity.
Venture Capital
Advantages Experts of business- There is one of the main advantage of this source is to get the
appropriate advice from business expertise of the industry at the time of starting of
business(Graf, Kling and Ruß, 2012). This sources are given by the sector a they also
provide the counselling for the purpose of building the strong aspects which helps to
develop the success of the business.
 Additional resources- It is other essential advantage of the business as they can get the
additional resources through the external enterprise in all the aspects of the entity. Thus,
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the entity will get most of he support in the different matters such as taxation advice and
legal matters that will be given the business.
Disadvantage Less control- There is reduction in the control by the business because of the stake of the
venture capitalist which are added in the enterprise. Thus, the whole interest will reduces
due the various involvement of the different persons in the management and there is
issues in order to take the decisions.
 Decision making- There is problem regarding taking decisions of the organisation
because of the involvement of the new people as they get affected and there is delay in
the decision making of the business.
Furthermore, there are certain sources which can be beneficial for Clariton Ltd including
loan from bank in order to raise funds to a greater extent. It is one of the most effective sources
that helps in attaining goals and objectives of company. Along with this, financial institutions are
always ready to provide secured loans for the different types of business organisations. This
banking institution give appropriate convenience to the organisation for repayment of loan
amount. Apart from this, it also assists firm for attaining the advantages of tax to a significant
level.
In addition to this, it can also be advised for the stated firm which can issue shares in
order to raise the level of funds in an effective manner and sufficient manner. One of the major
benefit of company is that share issuing which is less expensive and provide large amount of
profit which helps in to increase working capital of company. In this, Clariton Ltd is not required
to pay dividend to the shareholders in every year. In this context, payment of dividend on the
basis of company profitability If the company earn large amount of profit it will be distributed
equally to shareholders.
TASK 2
2.1
Criteria Venture Capital Partnerships
Interest The capitalist who make the The profit of business will be
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appropriate financial resources
to a individual and the
business will capable to take
part in the management of the
new entity as a stake in a
particular percentage that is
decided by both the
enterprises(Grant, 2016).
equally divided among all the
partners of the firm and there
is partnership deep which
helps to determining the
appropriate percentage.
Dividend Venture capitalist give their
essentials by prove the
resources of finance to the
business for the purpose of
establishing a new business
and there is no risk regarding
to pay the dividend.
The dividend will be given to
those who have the interest in
the firm and active
participation in all the
activities of the business.
Tax Tax can not be imposed on the
new entity as they establishes
their business in order to
support of the venture
capitalist which provides the
additional expertise of the
business. Further, Newly
established company gets
benefits to tax burden it
provides guidance for the
business regarding to external
and legal practices. (Hershey,
Jacobs-Lawson and Austin,
There is no taxation for the
new business as it is
considered as null as they are
supported by other partners.
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2012).
If firm takes loan from any financial institution firm has obligated towards the bank for
the repayment of loan amount with interest for a specified time period. It likes a monetary cost of
firm towards the financial institution this is one of the biggest financial sources of company. It
also provides high level of tax benefits.
2.2
Financial planning is the road map which helps in achieving the firm strategic objective
and goals. It provides the effective integration of all financial resources and managing activities
of finance. There are different aspects that helps the business for managing the financial
resources that are described below:
Budgeting- Budget is prepare for the purpose of forecasting all the expenses and income of the
business for the management point of view. Further, to make the improvements in the
performance of the business the standard figures to make the correction which is compared with
the actual figures of the budget(Johnston and Marshall, 2016).
Inadequate finance- In order to make appropriate improvements in the conditions of current
business there are some of the financial resources are kept that are used in a proper manner.
Inadequate finance makes an impact on the entity which helps in to solve the various approaches
of financial planning.
Overtrading – Trading helps to make the proper running of the business operations which
enhance the efficiency of the existing business and they can manage the financial resources of
the business. The problem of overtrading can be resolved with the help of taking correct
decisions so that it increases the level of performance(Kaplan and Atkinson, 2015).
2.3
Financial decisions makes a great impact on the performance of an entity which helps in
assessing the different aspects of finance at the time of takeover by various buinesses that are
described below:
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Venture capitalist- In order to source the business as it is required by them so that Claroton Ltd
have the option of funding to take from venture capitalist as it will accomplish all the desires of
business(Kingston and Weng, 2014). They also provide the capital with the different connections
of the business and the source of finance is considered by the owner to know all the different
expenses which are included in the sources. There is demand from the venture capitalist is about
20% for the smooth functioning of new business so that capitalist provides 0.5 million pound
money for the purpose of financial sources of the firm.
Financial broker- There is other option is available to the Clariton Antiques Ltd for raising the
0.52 million pound and to make the strong business and the approach is used by the business and
the additional cost is also included to take the proposal and it also gives benefits to them. The
financial broker charged 2% and the interest which is charged by taking bank loan and with the
help of external financial broker(Letellier and Eppich, 2015). The banks provide the loans as per
the demand of the entity and the interest is around 2% over the 10 years. Thus, with the help of
this approach the total expenses incurred is 0.15 million pound.
Partners- The enterprise will be acquired by the partners as it gives advantages for them as the
people are investing their money for the new business. As it is registered with the legal
authorities so that the business give the recognition to the law. In any organization there are
different types of partners are exist which may be a type of active and passive those provides
financial support in any form.
2.4
Financial statements defines an integral part of the company which shows the company
financial position and strengthen of the firm which makes the improvement on the basis of
present conditions of the existing business(Letkiewicz and et.al., 2014). The standard form the of
the financial statements including the financial position, cash flow statements and the statements
of income. Different sources of finance affects the company financial statements in order to
liability and assets sides that are given below:
Finance broker- Loan is debt obligation on the firm to provide the amount with the specified
rate of interest. It also shows on the liability side of the balance sheet which reduces the revenue
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and increasing the sales by paying the fees of broker (Michalski, 2012). There is proper records
of the income statements and the financial position statements and the interest will be charged on
that so this reduces the profitability of the business.
Venture capitalist- It is the capital provided to the business firm for the increment in the working
capital which mentioned in the financial statements to shows the financial position of the
recognized firm. It also affect the profitability of the corporation as it is involved in the income
statements of the company. In addition to this, by taking help from venture capital firms the
stated business is not required to pay the amount of dividend to the investors. Thus, the cost of
the firm will be recorded at debit side in the income statement.
TASK 3
3.1
Table 1: Cash budget
Particulars
January
(Values
in 000)
February
(Values in
000)
March
(Values in
000)
April
(Values in
000)
May
(Values in
000)
June
(Values in
000)
Sale 300 450 600 300 300 75
Opening cash 110 -38225 2905 86075 7385 105125
Receivables 15 360 90 15 240 1125
Total cash inflow 425 42775 9805 117575 12785 11375
Payment 80725 13725 11975 43725 22725 21975
Total outflow 80725 13725 11975 43725 22725 21975
Closing balance -382250 2905 86075 7385 1051250 91775
Cash budget is one of the important approach used by the management in order to
ascertain the existing cash position of an entity. The cash is important in the firm to maintain the
liquidity of an organization in meeting short term obligations of the business. The decisions in an
entity will be taken on the basis of existing balance held in a firm.
Interpretation
9

The cash budget of the clariton Ltd is reflecting its good position in order to beat all the
existing rivals and strengthen the current business entity. The results show that initially the firm
has generated negative figures which boost its speed in order to produce good amount of results.
The above budget has generated higher cash flows in order to minimise its overall cash outflows
incurred in a particular year(Swayne, Duncan and Ginter, 2012). The clariton Ltd has produces
good cash flow amount in the may month by generating higher cash flows as compared with the
cash expenses incurred in the firm.
3.2
Particular Units Cost(£) Cost per unit (£)
Variable cost
Direct material 5000 20000 4
Direct labor 5000 15000 3
Direct expenses 5000 10000 2
Total variable cost 5000 45000 9
Fixed cost
Labor 5000 25000 5
Production overhead 5000 5000 1
Aggregate fixed cost 5000 25000
Total cost 5000 70000 14
Add 12% Profit 5000 8400 1.68
Selling price £15.68
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The clariton Ltd will sell its products at a selling price of £15.68 in order to attract wide
number of customers towards its existing products. The clariton has decided to develop its
products efficiency by setting the best appropriate pricing patterns which is given as follows:
Cost plus pricing- It is widely used technique which is very helpful for the clariton ltd in order
to develop their overall pricing for various products. The cost plus pricing method is beneficial
for an organization it includes all the cost in to account. It includes all the cost fixed and variable
incurred during a financial year in an organization (Agarwal and et.al., 2015). The specific
percentage of profit are also considered by the owner to attract customers by keeping lower
prices by including small amount of profit.
Differentiation pricing- the prices are set by the clariton different for various clients according
to their convenience as the prices are developed as per the capabilities to negotiate more with the
seller. This attitude adopted by the business will steal the attention of wide number of buyers.
3.3
Table 2: Industry benchmarks
Particulars criteria for selection
Payback 3.5years
ARR 35%
NPV 2 million
Table 3: Project Details
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Table 4: payback of Project A
Calculation of payback period
=3+ 3.6/8.6
=3+0.41
=3.41 years
Table 5: Payback of Project b
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Calculation payback period
= 3+2.4/4.4
=3+.54
3.54 years
Interpretation
The payback period of project B has been matched with the standard criteria of 3.5 years
but project A has generated even less time period which should be selected.
Interpretation
The efficiency of the project has been assessed on the basis of profit generated by them
in a year. Both projects have meet determine criteria but the higher will be selected which is
project B.
Table 6: NPV of project A
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Table 7: NPV of Project B
Interpretation
The NPV is assessing the future profitability of the projects which states that all the
projects are according to the standard criteria. The Project A will be chosen as it produces higher
NPV.
TASK 4
4.1
There are different types of components of financial statements in a business which are
described below:
14

Income statements- Income statement is a kind of financial statement which gives information
about a financial performance of a company over a particular accounting period. The profitability
of any organization can be analyse through the income statement it will recognize all the sales
and revenue with the different expenses which are involved in order to operate the
business(Albrecht and Steinrücke, 2016).
Cash Flow statements-The statements of cash flow determine the changes in the balance sheet
and it effects on the income and the cash equivalents and to identify the operating and the
financing activities. The cash inflow and outflow is consider by the business with preparing these
statements. Furthermore, there are different activities of investment considering the sales and
purchase of fixed assets such as land, machinery as well as plant. Along with this, financial side
shows the information related to the issue of shares. Hence, it helps in evaluating some of the
aspects related to business units for assessing the area that needs high control on cash.
Statements of changes in equity- The opening and closing of the equity that will be considered
in order to ascertain the real performance of the equity.
Financial position statement- It is a financial statements which considers the statements of
assets and liabilities and the capital of the enterprise as a specific period of time and these is
detail information about the income and expenditure for the time. In assets side, it covers both of
the assets such as fixed as well as current which includes land, machinery, cash as well as
debtors. On the other hand, liabilities includes long term debt, shareholder equity along with the
creditors and overdraft.
Notes to financial positions- The notes to the financial statements that is prepared by the owner
of the business that explains all the details considering the different assets and liabilities.
4.2
Clariton Antiques Ltd creates the comparison on the basis of different format it involves
the sole trader and partnerships which are described below:
Sole trader- The financial statements that is prepared by the business with the standard format
including the financial position, cash flow statements and the income statements. The owner of
the sale trader in under no obligation in order to make the specific format for managing the
business.
15

Partnerships- Partnership firm follows several format of financial statements which has been
included the profit and loss appropriation account which one divide all the profits on the basis of
different finance ratio. The capital which is contributed by the various partners which is properly
recorded in the financial statements(Board, 2015). Thus, the partnership firm contributing the
different aspects and manage al their financial statements which is beneficial for them and helps
in analysing the resources in an appropriate manner.
4.3
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Interpretations
The above mentioned different types of ratios including gearing, efficiency and liquidity
ratios which analyse the capabilities of the business and it is found that this ratios shows the
increase and upward trend from time to time that shows the capability of Clariton Ltd in order to
take the other business opportunities. Thus, it helps in identifying the different opportunities to
the business and develop the aspects related to managing the various decisions of the business
which is beneficial for them. This will help them to grow and develop their business with the
appropriate sources.
Furthermore, it has been analysed that there is increase in the net profit ratio which shows
an appropriate profitability of the business against the revenue generation by the company.
Along with this, Clariton required to make control on the expenses for making improvement in
the current ratio to a significant level.
CONCLUSION
From this report we can be concluded that management of all the financial resources are
necessary and important aspects for all the business organization. We can also use all the
resources in an appropriate manner for getting the effective conclusion at Clariton Antiques Ltd.
In this report the company is using different sources of finance which is beneficial for them and
helps to grow their business in a significant manner. Further, there is explanation regarding the
various methods which helps the business costs and viability along with the use of appropriate
17

planning. It also includes the various financial statements and their use in the different sections
of the entity which is beneficial for the company. Moreover, in this report the entrepreneur
selected the rights funds which is beneficial for the business. It also helps to understand the
various assessment systems of investment and helps in the long term decisions for enterprise.
Thus, the financial resources of the business are used in an appropriate manner which helps to
increase in the growth and development of a company.
REFERENCES
Books and journals
Agarwal, S. and et.al., 2015. Financial literacy and financial planning: Evidence from
India.Journal of Housing Economics. 27. pp.4-21.
Albrecht, W. and Steinrücke, M., 2016. Continuous-time production, distribution and financial
planning with periodic liquidity balancing. Journal of Scheduling, pp.1-19.
Board, C.F.P., 2015. CFP Board Financial Planning Competency Handbook. John Wiley &
Sons.
Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice. Cengage
Learning.
Consigli, G., Brandimarte, P. and Kuhn, D., 2015. Financial Optimization: optimization
paradigms and financial planning under uncertainty. Or Spectrum. 37(3). pp.553-557.
Delgadillo, L.M., 2014. Financial clarity: Education, literacy, capability, counseling, planning,
and coaching. Family and Consumer Sciences Research Journal. 43(1). pp.18-28.
DRURY, C.M., 2013. Management and cost accounting. Springer.
Graf, S., Kling, A. and Ruß, J., 2012. Financial planning and risk-return profiles. European
Actuarial Journal. 2(1). pp.77-104.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Hershey, D.A., Jacobs-Lawson, J.M. and Austin, J.T., 2012. Effective financial planning for
retirement.
Huston, S.J., 2015. Using a Financial Health Model to Provide Context for Financial Literacy
Education Research: A Commentary. Journal of Financial Counseling and Planning.
26(1). pp.102-104.
Johnston, M.W. and Marshall, G.W., 2016. Sales force management: Leadership, innovation,
technology. Routledge.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
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Kingston, G. and Weng, H., 2014. Agency theory and financial planning practice. Australian
Economic Review. 47(3). pp.290-303.
Letellier, R. and Eppich, R. Eds., 2015. Recording, documentation and information management
for the conservation of heritage places. Routledge.
Letkiewicz, J.C. and et.al., 2014. Self-Efficacy, Financial Stress, and the Decision to Seek
Professional Financial Planning Help.
Michalski, G., 2012. Accounts receivable management in nonprofit organizations. Zeszyty
Teoretyczne Rachunkowości. (68). pp.83-96.
Swayne, L.E., Duncan, W.J. and Ginter, P.M., 2012. Strategic management of health care
organizations. John Wiley & Sons.
Online
Arbuckle, D., 2016. What are Internal Sources of Finance? [Online] Available
through:<http://smallbusiness.chron.com/internal-sources-finance-47552.html>
[Accessed on 30th December, 2016]
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