Assignment on the Sources of Finance
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Added on 2019-12-28
Assignment on the Sources of Finance
Added on 2019-12-28
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Table of ContentsINTRODUCTION ..........................................................................................................................1TASK 1............................................................................................................................................11.1 Sources of finance.................................................................................................................11.2 Implication of various sources of finance.............................................................................21.3 Appropriate sources of finance for Sweet Menu restaurant..................................................4TASK 2............................................................................................................................................42.1 Cost of various sources of finance........................................................................................42.2 Importance of financial planning .........................................................................................52.3 Information needed by decision maker.................................................................................52.4 Impact of sources of finance on Sweet Menu restaurant......................................................6TASK 3............................................................................................................................................73.1 Analyse of cash budget and appropriate decision................................................................73.2 Calculation of Unit cost........................................................................................................73.3 Viability of proposal by using investment appraisal techniques...........................................9TASK 4..........................................................................................................................................114.1 Main financial statements...................................................................................................114.2 Appropriate financial statements for different organisation...............................................114.3 Interpretation of financial statements by calculating appropriate ratios.............................12CONCLUSION..............................................................................................................................13REFERENCES .............................................................................................................................13
INTRODUCTION Finance is the branch of economic that is highly concern with the allocation of resourcesin each and every department present within the organization. In simple words it can be said thatfinance is the management of all the activities related to cash (Dada, Azim and Ullah, 2014). Inthis report two restaurants has been taken, one is Sweet Menu restaurant and another is BlueIsland restaurant. In this report various sources of finance that are suitable for the Sweet Menurestaurant are interpreted along with its implications. In addition to this cost that is incurred bythe company at the time of using various sources of finance are also mentioned. In addition tothis importance of financial planning to Sweet Menu restaurant is also interpreted. Along withthis information required by various decision makers are also listed below.In this report cash budget of Blue Island restaurant is analysed in order to takeappropriate decisions. In addition to this viability of a both the proposal are find out by usinginvestment appraisal techniques. In addition to this different types of financial statements arealso discussed. At last, various ratios are calculated in order to analyses which company financialposition is good in terms of profitability, solvency and liquidity.TASK 11.1 Sources of financeThere are different types of sources of finance available with the company through which theycan raise their capital. Some of the sources are present in internal environment while some ofthem in external environment. Some of the sources are listed below:-Internal Sources of FinanceRetained Earning:- Retained earnings is the part of fixed percentage of profit which isrequired to be kept with each and every organisation in order to meet up the contingencies thatcan occur in future (Kwak and et.al., 2015). This is one of the cost effective sources of financethat can be used by Sweet menu restaurant in order to meet up its requirement of capital. Sale of fixed assets:- this is the method through which Sweet Menu restaurant is raise itscapital by selling out the old and obsolescent assets that are of no use to the company. This is oneof the simplest methods of raising finance through internal sources.External Sources of Finance1
Issue of Shares:-This is one of the easiest method through which Sweet Menu restaurantcan raise its finance. In this method company issues equity shares to the general public orpotential investors (Lee and et.al, 2015). Thus, by using this source Sweet Menu restaurant willbe able to open up new branches without facing any financial crisis. Hire Purchase and Leasing: - It is another suitable external sources of finance throughwhich Sweet Menu restaurant can be able to use the asset and property for some time periodwithout purchasing it. This source acts as a safeguard for the Sweet Menu restaurant in case ofobsoletation of the technology. Bank Loans: - It is another source of finance through which Sweet Menu restaurant canbe able to meet up its financial requirement of the cash by approaching top bank. Through thismethod company can borrows funds from the bank by paying the high rate of interest. Inaddition to this company will also be able to avail various tax benefits if they prefer this source.1.2 Implication of various sources of financeSourcesLegal aspectsCost SuitabilityRetained earningAs per the legalaspects of law everyorganisation isrequired to keep withthem a fixedpercentage of profitearned by them duringa financial year(Murphy and Yetmar,2010). This in turnwill assist thecompany to easilymeet up thecontingencies that canarise in future.If Sweet Menurestaurant prefer tomove on with theretained earning thanin that case they willnot be in a position toface any uncertaintythat can arise in thefuture.This is suitablemethod for thecompany when theywant to reduce theinterference of theshareholders indecision makingprocess of theorganisation.Sale of fixed assetsSweet Menu restaurantis required to follow aIf Sweet Menurestaurant choose thisThis method issuitable when large2
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