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Top15-UNIT 2 MANAGING FINANCIAL RESOURCES INTRODUCTION 3 TASK 13 1.1 Importance of using external and internal sources of finance

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TOP15-UNIT 2 MANAGING FINANCIAL RESOURCES INTRODUCTION 3 TASK 13 1.1 Sources of finance available for the business 3 1.2 Implication for using external and internal sources of finance 4 1.3 Most appropriate sources of finance5 TASK 26 2.1 Analysis of cost of two source of finance6 2.2 Importance of financial planning for the organization 7 2.3 Assessment of information that is needed for making decisions7 2.4 Impact of financial statements8 TASK 310 3.1 Cash budget 10 3.2 Methods for determine unit

Top15-UNIT 2 MANAGING FINANCIAL RESOURCES INTRODUCTION 3 TASK 13 1.1 Importance of using external and internal sources of finance

   Added on 2020-01-07

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TOP15-UNIT 2MANAGINGFINANCIALRESOURCES
Top15-UNIT 2 MANAGING FINANCIAL RESOURCES INTRODUCTION 3 TASK 13 1.1 Importance of using external and internal sources of finance_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Sources of finance available for the business .......................................................................31.2 Implication for using external and internal sources of finance .............................................41.3 Most appropriate sources of finance .....................................................................................5TASK 2............................................................................................................................................62.1 Analysis of cost of two source of finance .............................................................................62.2 Importance of financial planning for the organization .........................................................72.3 Assessment of information that is needed for making decisions ..........................................72.4 Impact of financial statements ..............................................................................................8TASK 3..........................................................................................................................................103.1 Cash budget .........................................................................................................................103.2 Methods for determine unit cost of products ......................................................................123.3 Assessment for viability of projects with the help of capital budgeting ............................14TASK 4 .........................................................................................................................................174.1 major components of key financial statements ...................................................................174.2 Comparison of financial statements ....................................................................................174.3 Interpretation of financial statement using financial ratios .................................................18CONCLUSION .............................................................................................................................21REFERENCES .............................................................................................................................222
Top15-UNIT 2 MANAGING FINANCIAL RESOURCES INTRODUCTION 3 TASK 13 1.1 Importance of using external and internal sources of finance_2
INTRODUCTIONFast changing global business environment requires business organizations to be morestructured and effective. Financial planning need to be done in the entity so that requiredoperations can be carried out in effective way (Adler, 2013). Financial planning done in asystematic and organized way supports for carrying out required business functions in effectiveway. Moreover, expansion and other operations of business can be performed in effective andadvanced way and it also helps for accomplishing desired functions and activities of entity ineffective and advanced manner. Present report describes about different types of sources offinance that are available for the business. In addition to that implication of sources on firm'sfinancial performance have been mentioned. Moreover, most benefited source of finance forClariton organization has been described. TASK 11.1 Sources of finance avilable for the business Clariton organization has options for funding their operational activities by making useof unincorporated and corporated sources of finance. It is vital that all the sources should beselected by conducting proper analysis and it will also help for raising funds for financingoperational activities of the enterprise (Bierman and Smidt, 2012). Different sources of financethat are available for business are as mentioned :-Unincorporated business :- This type of business organizations are free from any kind oflegal regulations. Owner of the organization holds liability for complete ownership and liabilityof the business is with rest with the owner. All the decisions for running the functional activitiesof the enterprise are carried out by joint decisions taken by owners of the entity. Fewerinterference are made by any external party (Altman and Hotchkiss, 2010). There are variousmethods on the basis of which funds can be raided by business organizations. The sources are asmentioned :- Sale of assets :- By making use of this source organizations can sale their current assetsand it will support for raising funds to carry out business activities (Brigham and Ehrhardt,2013). There is no need to pay any kind of interest and profitability of entity does not gethampered when these sources are used for funding the operational activities of Clariton3
Top15-UNIT 2 MANAGING FINANCIAL RESOURCES INTRODUCTION 3 TASK 13 1.1 Importance of using external and internal sources of finance_3
organization. Role of external party is negligible and there is no need to take assistance from anyexternal broker for executing business functions. Investment made by owners :- earnings and past profits of the entity can be used for makinginvestments in operational activities that are carried out in the entity (Malmi and Granlund, M.,2009). Own investments can be used by the owners for raising funds to carry out the businessactivities. There is no need to pay any kind of interest on own investments that are used byowners for funding the business activities. Disposal of assets :- company can adopt these methods for funding the operations of theentity. Existing assets of the entity can be sold and it will help for gaining large sales andrevenues for executing business functions (Romano, Tanewski and Smyrnios, 2001). Thismethod provide internal financing for executing functions of business. Incorporated business :- it is vital that functional activities of incorporated businessorganizations should be carried out in systematic and structured manner. Venture capital :- It is the most effective and mostly used source of finance that can beused by Clariton for raising funds to carry out business activities. When this source of finance isused than profitability and revenues earned by the company gets influenced and burden isimposed on the enterprise (Fadare, 2011). Finance can be generated for expanding the existingoperations of the entity and it will help for accomplishing the desired goals and targets of theenterprise. Bank loans :- it is also an effective medium that is used by organizations for funding theoperational activities of the enterprise. It is required that specific amount of interest should bepaid for executing desired business in effective way. 1.2 Implication for using external and internal sources of finance There are some implications of sources of finance and these need to be considered forexecuting business functions in better manner. Different sources of finance and thereimplications are as described :-Sale of stock :- financial implication of these sources are observed and company saleinventory for raising funds for executing required business activities. Asset side of the financial4
Top15-UNIT 2 MANAGING FINANCIAL RESOURCES INTRODUCTION 3 TASK 13 1.1 Importance of using external and internal sources of finance_4
document reduces and due to that implications are observed on the financial statements of theenterprise (Shepherd, 2015). Owner's investment :- When owners use their own investments than profitability of theentity does not get affected. No financial impact is observed on the performance of theorganization. Disposal of assets :- when this method is used for raising funds for business activitiesthan impacts are observed on financial statements that are used in the enterprise. Cash balancesheet gets affected and company faces difficulty in fulfilling their short term obligations. Whenfunds are raised through assets than no legal implications are observed on the business (Gumbo,2010). Total control of operational activities of the enterprise remains with the owner of theentity. Venture capital :- It is required that company should pay its financing cost in terms ofstake. When this method is used for raising funds than it is also needed that dividends should bepaid to the stakeholders of the enterprise (Pike and Neale, 2006). In this method company has toprovide return on investment. Company meet criteria to meet ROI. Sometimes owner loosecontrol on activities of firm and due to that overall performance of the enterprise gets affected. Hire purchase :- Implications are observed when this method is used for carrying outbusiness activities and in this technique owner gives some part of assets to external party due towhich total assets of the entity gets affected (Gassen and Schwedler, 2010). Impact is alsoobserved on balance sheet and financial documents prepared by the enterprise. It is required thatdocuments should be prepared and terms and conditions should be mentioned. Dilution ofcontrol remains at hire purchase and not with the entrepreneur. 1.3 Most appropriate sources of finance It is required that funds should be raised for executing business functions of Clariton andmany options are available with the enterprise for carrying out required business activities.Various medium through which funds can be collected are as follows :- Venture capital :- It is the most effective and appropriate source of finance that can be used inClariton organization for raising funds for executing business functions. Better financial servicesare provided with this medium and it also helps for executing the operational functions of the5
Top15-UNIT 2 MANAGING FINANCIAL RESOURCES INTRODUCTION 3 TASK 13 1.1 Importance of using external and internal sources of finance_5
enterprise in sequential manner (Manyard, 2013). It is required that higher dividends should bepaid to shareholders as compared to money invested by them. Shareholders of Clariton willincrease and it will support for accomplishing required goals of Clariton organizations. Bank loans :- Company has option for funding their operations from taking loans from banks andit will support for funding the required operations of entity in effective way. There is need thatspecific interest rates should be paid to banks on the loans that have been taken and due to thatoverall profitability and financial revenues of the company gets affected (Shenming and et.al.,2011). It is easy method and it is also required that proper documents should be submitted whiletaking bank loans and due to that sometimes difficulties are faced in taking loans. TASK 22.1 Analysis of cost of two source of finance There are different cost of sources of finance which are as follows- Dividends- It is one of the cost of sources of finance that helps Clariton company to raisefunds with the help of venture capitalist that imposes cost of finance within firm. Itincreases the cost of firm because firm needs to pay dividends to their stakeholders andtherefore, it is considered as one of the expenses to firm (Bierman and Smidt, 2012).Company is supposed to give dividends to its stakeholders that is increasing the cost ofbusiness. However, venture capitalist takes cost which is around 20% of the wholebusiness of Clariton.Interest- Moreover, it is another cost to source of finance in which firm is required togive interest to the amount taken as loan from bank. Thus, Clariton takes charge in termsof providing interest to the bank and minimizes the profit generated by them. It involvesdifferent types of interest i.e. fixed and flexible and thus helps in obtaining finance fromfirm (Chandra, 2011). Fixed interest rate can be stated that it remains fixed for certaintime period and does not change constantly. While, flexible interest rate is that in whichinterest rate changes as per the period of time and does not remain constant. Thus, due tosuch reason Clariton aims to take loan at fixed interest rate. Tax- Such type of cost is only charged upon the dividend paid by business to the shareholders.Clariton is required to give proper amount of tax and thus it affects the financial position of firm.6
Top15-UNIT 2 MANAGING FINANCIAL RESOURCES INTRODUCTION 3 TASK 13 1.1 Importance of using external and internal sources of finance_6

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