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Assignment : Managing Financial Resources and Decisions Solution

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Added on  2020-01-07

Assignment : Managing Financial Resources and Decisions Solution

   Added on 2020-01-07

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MANAGING FINANCIALRESOURCES ANDDECISION MFRD
Assignment : Managing Financial Resources and Decisions Solution_1
TABLE OF CONTENTSINTRODUCTION ..........................................................................................................................3TASK 1............................................................................................................................................31.1 Sources of finance .................................................................................................................31.2 Implication of using external and internal sources of finance ..............................................41.3 Most appropriate sources of finance .....................................................................................5TASK 2............................................................................................................................................62.1 cost of two sources of finance ...............................................................................................62.2 Importance of financial planing ............................................................................................72.3 Assessment of information of financial planning .................................................................82.4 Impact of financial statements ..............................................................................................9TASK 3..........................................................................................................................................103.1 Cash budget .........................................................................................................................103.2 Calculation of cost per unit .................................................................................................123.3 Investment appraisal techniques .........................................................................................12TASK 4 .........................................................................................................................................154.1 Key components of financial statements ............................................................................154.2 Format of financial statements ............................................................................................154.3 Interpretation of financial statements. .................................................................................16CONCLUSION .............................................................................................................................18REFERENCES..............................................................................................................................192
Assignment : Managing Financial Resources and Decisions Solution_2
INTRODUCTION Strategic and systematic approach is required for managing the financial resources of theorganization. Many critical and complex situations are faced in the enterprise while managingthe funds and due to that overall performance of the business in effective way (Malmi andGranlund, 2009). Present report is based on Clariton Antiques Ltd which was founded by jointefforts given by business partners. The report describes about different sources of finance thatare available for unincorporated business and incorporated business. In addition to thatassessment of implication for using internal and external sources of finance has been mentioned.Moreover, evaluation of appropriate sources of finance has been done and analysis of cost of thetwo sources of finance has been done in the report. TASK 11.1 Sources of finance Different sources of finance are available for unincorporated business and incorporatedbusiness. Various sources of finance supports for executing the business functions in effectiveway. Wide range of sources are as described :-UNINCORPORATED BUSINESS :- These types of business are explained as commercialundertakings that are closely held by different groups (Khan and jain, 2006). Cited firm ClaritonAntiques Ltd has been established as an unincorporated business and all the operational activitiesof the entity are performed in the same manner. Prominent sources of finance that are availablefor the business includes sourcing off monetary resources with the help of investors (Hayre,2013). Under this method allocation of capital is done with objective to achieve financial returnsin the future. There are many advantages for using this source and it provides a method for arrangingfunds for carrying out business activities in by gathering funds in cost effective manner. Forstarting a new business funds can be arranged and allocation of capital can also be done ineffective way (Thakur and Chakraborty, 2015). Along with this Venture capitalist method canalso be used for collecting sources of funds for running out business activities. By making use ofthis method tax benefits to investors can also be gained. However, it is required that clear exit3
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strategy for investors should be made and shared control should be done so that required fundscan be collected properly (Strange, 2015). INCORPORATED BUSINESS :- Business organizations that are registered formally areincluded in the category of incorporated business. There are many advantages for starting theoperations of entity as an incorporated business (Prakash, 2014). Benefits are received indeduction of taxes and it also supports for getting protection of liabilities. Shares can be sold andfunds can be raised for carrying out business activities in effective way. By making use of thismethod more funds can be collected for carrying out business functions (Vimpari, Kajander,and Junnila, 2014). In addition to that large scale investments can also be made possible bymaking use of this method. However, there are some disadvantages of this method and share values can rise and falland due to that company values will also get fluctuated. This technique is also expensive to setup and shared control is a difficult task to achieve. Bank loans can also be taken and larger sumscan be received for investing and expanding the business (Lapsley, Miller and Panozzo, 2010).There are some disadvantages of this method also and it may be vulnerable to change interestrates. Government grants and loans can also be taken and it will help for running out operationalactivities of a new startup business (Li and Chi, 2013). Government grants loans at a cheaperrates and some grants given by government are non repayable. There are some disadvantagesalso and these grants given by government are limited in size and they are stricted. 1.2 Implication of using external and internal sources of finance There are some implications for using internal sources of finance and using externalsources of finance. Evaluation of both the sources is as mentioned :-External sources of finance :- There are many sources which can be used for funding theoperational activities of the entity. Bank overdrafts can be taken and it will support for gettingand maintaining short term flows, no security is needed for taking bank overdraft and it willsupport for gaining required money for carrying out required business activities (Lazonick,2012). Internal sources of finance :- Internal sources of finance includes sale of assets and sales of stock. Organization can make use of these medium for financing the operations of business and it will4
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