Significance of Finance for Establishing Small Restaurant | Report

Added on -2020-02-05

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MANAGING FINANCIALRESOURCE DECISIONS
Table of ContentsINTRODUCTION......................................................................................................................1TASK 1......................................................................................................................................1AC 1.1 Identify the sources of finance available to restaurant business...............................1AC 1.2 Implication of finance sources..................................................................................2AC 1.3 Evaluation of appropriate source..............................................................................2TASK 2......................................................................................................................................3AC 2.1 Cost of each finance source......................................................................................3AC 2.2 Importance of financial planning..............................................................................3AC 2.3 Information need of internal and external decision makers......................................3AC 2.4 Impact of finance sources on the financial statements..............................................4TASK 3......................................................................................................................................5AC 3.1 Projected budget for six months................................................................................5AC 3.2 Computation of unit costs and pricing decisions......................................................6AC 3.3 Implication of capital budging tools.........................................................................6TASK 4......................................................................................................................................7AC 4.1 Main financial statements produced by different organizations...............................7AC 4.2 Structure, content and details of main financial statements......................................7AC 4.3 Interpretation of financial statements........................................................................7CONCLUSION..........................................................................................................................7REFERENCES...........................................................................................................................7
Illustration IndexIllustration 1: Balance sheet of sole trader.................................................................................9Illustration 2: Profitability statement of sole trader..................................................................10Illustration 3: profitability statement of partnership.................................................................10Illustration 4: balance sheet of partnership...............................................................................11Illustration 5: profitability statement of company....................................................................12Illustration 6: balance sheet of company..................................................................................13
INTRODUCTIONFinance is a very crucial element in every business organizations. It is necessary forestablishing new firms and hazard free operating functions. . Without having adequateamount of funds, business cannot survive in the market. In the present report, Governmentprovide opportunities to small firms by setting target in which 1£ of every 3£ governmentspending will be for small businesses by 2020. The report will discuss the significance offinance for establishing a small restaurant business in UK. Moreover, financial performancewill be analysed for Sainsbury business organization. TASK 1AC 1.1 Identify the sources of finance available to restaurant businessAs per the scenario, restaurant owner requires 300000£ for contract bidding whileonly 20000£ is available to them. Hence, additional finance requirement can be fulfilledthrough following sources:Bank Loans: Banks assist the restaurant business by providing funds in the way ofloans. UK government's National Loan Guarantee Scheme (NLGS) and Funding for LendingScheme (FLS) provide huge assistance to the restaurant owners for getting funds at cheaperrates. It reduces cost of borrowings for businesses and mitigates their funds requirement fordifferent time durations (Cassar, Ittner and Cavalluzzo, 2015). Further, it increases unsecuredbusiness lending on the basis of government guarantee. In UK, Scottland, Natwest, Barclays,Lombard, Santander and Ulstar bank provide funds to small organizations whose annualturnover lies under the maximum limit of 250£ million. Equity finance: Restaurant unit can obtain funds in the form of equity. It can start itsrestaurant by issuing equity share capital. Government Enterprise Investment Scheme (EIS)encourages potential investors to invest their funds in small enterprises by providing taxreliefs. According to the scheme, investors can invest up to 1£ million and they will bequalified to take tax benefits of 30% of investment cost. Venture capital: UK government Venture Capital Trust Scheme (VCTS) encouragescapitalists to invest funds in small firms. They can invest funds in the form of equity anddebt. As per the scheme, investors whose total investment is less than 200000£ in eachfinancial year will be eligible for income tax relief at 30% rate. Moreover, capital gain at thetime of disposal and dividend earnings on such investment are exempted from income tax.Thus, restaurant business can fulfil their financial need by taking venture capital. 1 | P a g e

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