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ManAGING FINANCIAL RESSOURCE DECISION INTRODUCTION 1 TASK 11 AC 1.1 Implication of finance sources for the business

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MANAGING FINANCIAL RESOURCE DECISION INTRODUCTION 1 TASK 11 AC 1.1 Identify the sources of finance available to business 1 AC 1.2 Implication of finance sources2 AC 1.3 Most appropriate finance source for the business 2 AC 2.1 Cost of each identified finance sources 3 AC 2.2 Importance of financial planning 3 AC 2.3 Information needs of internal and external decision makers4 AC 2.4 Impact of financial sources in the financial statements4 AC 3.1 Forecasted budget for six months 5 AC 3.2 Calculation of unit cost5 AC 3.3

ManAGING FINANCIAL RESSOURCE DECISION INTRODUCTION 1 TASK 11 AC 1.1 Implication of finance sources for the business

   Added on 2020-01-28

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ManAGING FINANCIAL RESSOURCE DECISION INTRODUCTION 1 TASK 11 AC 1.1 Implication of finance sources for the business_1
Table of ContentsINTRODUCTION .....................................................................................................................1TASK 1......................................................................................................................................1AC 1.1 Identify the sources of finance available to business................................................1AC 1.2 Implication of finance sources..................................................................................2AC 1.3 Most appropriate finance source for the business ....................................................2AC 2.1 Cost of each identified finance sources.....................................................................3AC 2.2 Importance of financial planning..............................................................................3AC 2.3 Information needs of internal and external decision makers....................................4AC 2.4 Impact of financial sources in the financial statements............................................4AC 3.1 Forecasted budget for six months.............................................................................5AC 3.2 Calculation of unit cost.............................................................................................5AC 3.3 Investment appraisal techniques...............................................................................6TASK 2......................................................................................................................................8AC 4.1 Discussion of main financial statements...................................................................8AC 4.2 Main financial statement of different types of business...........................................8AC 4.3 Interpreting the financial statements.........................................................................9CONCLUSION .......................................................................................................................10REFERENCES.........................................................................................................................12
ManAGING FINANCIAL RESSOURCE DECISION INTRODUCTION 1 TASK 11 AC 1.1 Implication of finance sources for the business_2
INTRODUCTION Finance plays a crucial role in the businesses. Every small and medium sizedorganization needs adequate availability of financial resources to operate successfully in themarket. Moreover, firms do not require generating sufficient funds only they need to manageit in an efficient way. The present project report will provide assistance to determine thefinance sources available to small and medium sized businesses with their implications.Furthermore, it will discuss the role of financial plans in the finance management. In additionto it, budgetary tools, investment appraisal techniques, unit cost and financial statementanalysis will be discussed in order to take good managerial decisions. TASK 1AC 1.1 Identify the sources of finance available to businessThe scenario depicts that government intends to spend 1£ in every £3 with the smallbusinesses thus, it is a big opportunity for small firms. According to it, firms who employed250 employees or less is known as SME. There is a great opportunity for the growth of smallscale retail business in UK, and the decided contract is to get the franchise of DunkinDoughnuts. The scenario indicates that available funds to the retail business is 20000£ with amaximum contract bid price to 300000£. Therefore, additional finance sources available toretail business are explained below: Bank Loans: Financial institutions such as banks provide funds for different timedurations at an implied interest rate. Borrowing funds through banks helps to generate largeamount of finance for the small scale retail business (Brealey and et.al, 2012). It is anexternal source of finance and fulfils the need of financial resources to a great extent. Bank overdraft: Overdraft is a facility that allows users to withdraw higher funds thanavailable in bank balance. It provides assistance to fulfil immediate fund’s requirement ofretail organization. Bank charges interest on this facility whose rate is comparatively higherthan loan interest rate.Personal savings: It is a cheaper source of finance for SME as available at lower cost.Firm owners can use their personal savings for business purpose. Moreover, it helps tomaximize entrepreneur control on the business. Sales of assets:Unused business assets can be disposed off in the market for gettingrequired amount of funds. It is a short term finance source and helps to acquire funds up to alimited extent. 1 | P a g e
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Lease: Small scale retail sector companies can acquire fixed business assets on leasewithout purchasing them. Firms have to pay rental charges periodically for using assets.Thus, with the instalment payments, interest charges are also required to pay to the lessor. AC 1.2 Implication of finance sourcesBank loans: Retail organization needs to pay interest charge at a fixed time interval.Moreover, entrepreneur has to keep a security against the borrowed funds (Brush, Edelmanand Manolova, 2015). They have to fulfil all the legal formalities as per the bankrequirement. Another implication is that in case of any default in payments, banks have legalright to dispose off the security in order to generate loan liabilities of the entrepreneur. Overdraft: The implication of overdraft is that enterprises need to pay off the intereston the taken overdraft. Bank charges normally high rate of interest on overdraft as compare toloans. Furthermore, the facility is available up to a limited extent. Continuous bank overdraftin the balance sheet affects company's image in a negative way. Personal savings: Business owner can use their personal savings in the firm. Theimplication is that it helps to maintain owner’s control on the firm. The reason behind is thatit reduces the amount of external borrowings. Sale of assets: Retail organization has to make some expenditure in order to saleassets in the market. It includes the expenses of attorney, advertisement and removal of assetsfrom the factories. Lease: Small and medium sized retail business owner has to pay hire or rental chargeson the timely basis. Furthermore, the ownership is not transferred as firms do not purchasethose assets. In addition to it, if, enterprises do not paid their liabilities timely than asset’sowner has legal right to get back the fixed assets from the lessee. AC 1.3 Most appropriate finance source for the business On the basis of above implications, it can be reported that bank loans will be the mostappropriate finance source for the retail business. The reason behind choosing such source isthat bank provides funds for short-term, medium-term and long term as per the financialrequirement. Moreover, loans can be generated through providing collateral security.Another, it does not diversify business control to the lenders from the entrepreneurs (Rao,2010). Furthermore, through making regular payment of interest and instalment, companycan discharge its loan’s liabilities on maturity date. Another most important benefit ofchoosing bank loans is that retail sector organizations will be provided taxation relief on theinterest payments. This in turn helps to get tax benefits and maximize profitability. 2 | P a g e
ManAGING FINANCIAL RESSOURCE DECISION INTRODUCTION 1 TASK 11 AC 1.1 Implication of finance sources for the business_4

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