Managing Financial Resources and Decisions

MANAGING FINANCIAL
RESOURCES AND DECISIONS
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Financing sources which are available for an enterprise.......................................................3
1.2 Assessing implications of financing sources.........................................................................3
1.3 Evaluation of suitable financing source.................................................................................4
TASK 2............................................................................................................................................4
2.1 Cost of identified sources of finance.....................................................................................4
2.2 Significance of financial planning.........................................................................................4
2.3 Assessing information which are needed to take financing decisions...................................5
2.4 Influence of financing sources on financial statements.........................................................5
TASK 3............................................................................................................................................6
3.1 Projected cash budget............................................................................................................6
3.2 Computing units cots and price.............................................................................................6
3.3 Assessing investment appraisal techniques...........................................................................7
TASK 4............................................................................................................................................9
4.1 Key aspects of different financial statements........................................................................9
4.2 Comparison between financial statements.............................................................................9
4.3 Assessing business performance of Sainsbury Plc using financial ratios............................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
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INTRODUCTION
Finance is an aspect of the firm which helps to entrepreneur to exist in the industry or
market. Along with this, it is compulsory to take effectual business decisions in order to increase
financial health of it. The current study is based on Sainsbury public limited company which
operates in retail sector. The present report emphasises on various financing sources which helps
to raise capital for business expansion. Further, it focuses on cash budget as well as unit cost
along with investment appraisal methods. It looks upon financial performance of Sainsbury Plc
from accounting period 2015 to 2016.
TASK 1
1.1 Financing sources which are available for an enterprise
In the present case Sainsbury Plc is going to undertake a project for which it needs
finance. There are various sources of finance among them some are explained as below:
 Equity shares: In such type of source Sainsbury issue shares in the market with help of
stock market and these are purchased by shareholders (Zhao and Chu, 2016). The amount
of purchasing is to be used in the firm for expansion. Bank loan: As per this, bank provide sum of money which is known as bank loan. It is
easy and short process compare to equity but cost of bank loan is comparatively higher.
Further, bank provide fund to Sainsbury after valuation of it in industry. Retained profit: It is internal source where the sum of money which is remaining after
provide dividend to shareholders is to used for financing the project.
1.2 Assessing implications of financing sources
Source of finance Implication in terms of financial Implication in terms of legal
Equity shares In this Sainsbury has to provide
dividend to stockholders which lead
to impact on profitability.
Sainsbury must listing the firm
in stock market and then it can
issue shares and raise fund
(Osei-Assibey, 2013).
Bank loan Here management has to pay interest While taking bank loan it has
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amount to bank from profit by which
net profit affects.
to show profit level and
various financial statements to
determine valuation of it.
Retained profit Being an internal source there are not
any financial impacts are there.
Due to internal source there are
any legal rules are not
imposed.
1.3 Evaluation of suitable financing source
For raising finance for undertake project equity share is most suitable for Sainsbury
where it has too listing the firm in stock market. It is easy method and cost of finance is low as
compare to bank loan. Further, by using this more number of shareholders are attracted which
lead to enhance capital in the firm (Engel, Fischer and Galetovic, 2013). However, when
Sainsbury go through equity shares then it is necessary to listing entity in stock market otherwise
it cannot raise fund.
TASK 2
2.1 Cost of identified sources of finance
Equity shares: While raising fund from equity then the Sainsbury has to pay cost of finance in
terms of dividend amount to the shareholders. Hence, here financing cost of respective source is
dividend amount which is given from the net profit generated by it.
Bank loan: Further, financing cost of bank loan is in terms of interest amount which is imposes
by the commercial bank on Sainsbury. Cost of finance of bank loan is higher as compare to
equity shares (Minsky, 2015).
Retained profit: It is an internal financing source in which any kind of cost or expenses are not
there which has to be paid by Sainsbury.
2.2 Significance of financial planning
Financial plan is highly important for each and every company in order to manage
financial resources and make the firm financially sound up to higher extent. Using the plan
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