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Sources of Finances in Sweet Menu Restaurant : Report

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Added on  2020-01-23

Sources of Finances in Sweet Menu Restaurant : Report

   Added on 2020-01-23

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Management of Financial Resourcesand Decision Making 1
Sources of Finances in Sweet Menu Restaurant : Report_1
Table of ContentsINTRODUCTION ..........................................................................................................................3TASK 1............................................................................................................................................31.1 Identification of the sources of finance available ................................................................31.2 Implications of sources of finance.........................................................................................41.3 Appropriate source of finance for Sweet menu restaurant.....................................................5TASK 2............................................................................................................................................52.1 Cost of sources of finance......................................................................................................52.2 Importance of financial planning...........................................................................................62.3 Assessment of the information needs of the different decision maker of Sweet menu.........62.4 Impact of the sources of finance upon the financial statements of Sweet menu which areundertaken by them to meet their financial needs.......................................................................7TASK 3............................................................................................................................................73.1 Analysis of the budget and appropriate business decision based upon it..............................73.2 Unit cost to determine the pricing of the product and services offered by Blue Islandrestaurant......................................................................................................................................83.3 Investment appraisal tools to assess viability of projects .....................................................9TASK 4..........................................................................................................................................104.1 Financial statements.............................................................................................................104.2 Comparing the formats of financial statements for the different types of businessorganization................................................................................................................................104.3 Interpretation of the financial statements by making analysis of the ratios of both therestaurants..................................................................................................................................15CONCLUSION .............................................................................................................................172
Sources of Finances in Sweet Menu Restaurant : Report_2
INTRODUCTION In modern era, managing finance resources is considered as one of the most importantaspect of every business. Further, it is only because of the effective decision regrading utilizationof financial resources which helps a company to grow and developed. This report demonstratevarious sources of finances which are available with Sweet menu restaurant. Along with this, thereport also highlights the cost and implications of all the available sources of finance. TASK 11.1 Identification of the sources of finance available Every company is required to determine various sources of finances at the time of growthand expansion. Sweet Menu Restaurant Ltd. is planning to open two new stores in CentralLondon and Crovdon. For this purpose there are various long term and short terms sourcesavailable with the company. One of the major difference between short and long term sources isthat short terms sources provides finance for short span of time whereas long terms sourcesprovides money for long time period. The sources are mentioned below as: Bank loans- It is considered as one of the best and trustful sources from which SweetMenu can raise finance for opening two new stores. Bank can provide amount to therestaurant in the form of loan. Further interest will be charged by the bank regarding thesame. There are two types of interest rates on which banks provides loans and the ratesare fixed and floating (Sources of finance. 2012). Venture capital- According to this sources of finance, other companies or parties investmoney in projects of a firm. Sweet Menu Restaurant Ltd. Can also use this sources offinance and it will be required to provide shareholding to the party which has providedthe funds. In addition to this, the party will also have right in day to day activities anddecision making process of the restaurant. Retained earnings- This is also termed as an internal sources of finance in which therestaurant can use its own earnings in order to open two new stores. The earning whichwill the one which remains after deducting expense form the revenue. 3
Sources of Finances in Sweet Menu Restaurant : Report_3
Debentures- The restaurant can also issue debentures in general public in order to raisefinance for its new project. Further Sweet Menu Restaurant Ltd. will be required to payinterest to all the debentures holders. Hire purchasing: This is the most important external sources of finance in whichcompany purchases assets on instalment. A significant amount of down payment is paidfirst and rest amount is paid through instalments. However, the ownership of assets istransferred after payment of last instalment. 1.2 Implications of sources of financeSources offinanceAdvantagesDisadvantagesLegalCostBank loanThe company isnot required tocontrol thedilution Loan at floatinginterest rate willresults inincreasing theoverall cost offinance. The restaurant isrequired to presetthe completedocument whichare required bythe bank The interest paidon loan willtermed as the costof financeRetainedearningsThere is no costof finance onretained earnings If the earnings arenot used ineffective mannerthentheopportunity costwill directly getsincreasedThere is no legalrequirements incase of retainedearningsOpportunity costis considered asthe cost ofretained earningsas a source offinancingVenture capitalThe cost offinance cannot beadjusted which isone of the majoradvantage of thissource Organizationshave control ondilution (Gibson,2012)As per law, acontract isrequired to besigned betweenventure capitalfirm andThe cost ofventure capital isreturn provided tofirm which hasgiven venturecapital. 4
Sources of Finances in Sweet Menu Restaurant : Report_4

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