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Various Sources of Finance Available to Sweet Menu

   

Added on  2020-02-05

18 Pages5161 Words68 Views
MFRD

Table of ContentsINTRODUCTION ..........................................................................................................................1TASK 1............................................................................................................................................11.1 Identifying sources of finance available to Sweet Menu restaurant.....................................11.2 Assessing the implication of sources of finance which are identified above........................21.3 Evaluating the most appropriate source of finance for Sweet Menu Restaurant..................3TASK 2............................................................................................................................................32.1 Analyzing the cost of different sources of finance for Sweet Menu Restaurant...................32.2 Stating the importance of financial planning for Sweet Menu Restaurant in context toexpansion project........................................................................................................................42.3 Assessment of information need of different decision makers.............................................52.4 Stating the impact of sources of finance upon financial statements of an organization.......5TASK 3............................................................................................................................................63.1 Analysis of the cash budget of blue Island restaurant and decisions based upon it..............63.2 Stating the calculation of unit cost and making pricing decisions........................................73.3 Assessing the viability of project by using investment appraisal techniques.......................7TASK 4..........................................................................................................................................104.1 Main financial statements of an organization.....................................................................104.2 Comparing formats of financial statements of different types of business.........................114.3 Interpreting the financial statements of Sweet Menu and Blue island restaurant by usingratio analysis..............................................................................................................................13CONCLUSION..............................................................................................................................14REFERENCE.................................................................................................................................15

INTRODUCTION Financial resources refer to money which is available to business organization for theinvestments. Finance is the most essential element of business which helps organization inmaking contribution for the achievement of organizational goals and objectives. Financemanager of an organization plays a vital in managing funds more effectively and efficiently byframing competent strategies or policies (Beaver, McNichols and Rhie, 2005). The present reportis based upon Sweet Menu Restaurant which is the most reputable restaurant of East London.This project depicts various sources of finance which are available to Sweet Menu for theirexpansion project. Besides this, it will also develop understanding about the importance offinancial planning which helps finance manager in making cost effective decisions. Further, itwill also examine the tools and techniques of capital budgeting which helps the organization inmaking appropriate investment decisions. In addition to this, the present study will provideinformation about financial health and performance of an organization.TASK 11.1 Identifying sources of finance available to Sweet Menu restaurantSources of finance refer to the ways through which Sweet Menu restaurant can generatesuitable amount of money which they require for their expansion plan. As per the case scenario,Sweet menu restaurant makes plan in relation to the opening of new branches in Central Londonand Croydon. On the basis of this aspect, there are various internal and external sources offinance which are available to Sweet Menu for their expansion of project which is enumeratedbelow:Internal sources of financeAngel investors: Angel investors are the most important source of finance which includesfriends and family members of the company. Usually, friends and family members givefinancial support to their loved ones. For this, restaurant needs to give shareholding totheir friends and family members. Through this, Sweet Menu can easily fulfill itsfinancial needs or requirements. Retained profit: Retained earnings are the most effective and cheaper source of finance.To meet the future contingencies, each and every organization retains the fixed1

percentage of profit with itself. Thus, Sweet Menu can also meet its financial need bymaking use of retained profit.Sale of assets: Sweet Menu restaurant can meet its financial need by selling unprofitableasset which have no use in business. It helps company in generating money and therebyprovides money for its expansion project (Anheier and Winder, 2007).External sources of financeIssuance of equity shares: It is the most effectual source of finance which helpsorganization in meeting their financial needs for the longer duration. Sweet Menu cangenerate money by offering share to their existing and potential shareholders. Leasing: Sweet menu can also expand its business operations and activities by takingresort of leasing. It offers right to Sweet Menu to make use of building or other asset.They pay amount to them on periodic basis for the same. Loan from financial institutions: Restaurant can also raise their finance by approachingbank or other financial institution on the basis of collateral security. Through this, SweetMenu can easily meet its financial need and thereby expand their business operations(Vitez, 2014). 1.2 Assessing the implication of sources of finance which are identified aboveEach source of finance has different legal and cost implications. Implications of theabove mentioned sources of finance on Sweet Menu Restaurant are as follows:SourcesLegal aspectsDilutionBankruptcyAngle investorsCompany is requiredto follow a legalprocedure if shares areissued to the angleinvestors. Ownership of the fundborrowed by thecompany changes.Angle investors canrecover their moneyby selling the assets ofthe company in case ofbankruptcy.Retained profitCompany is notrequired to follow anylegal procedure at thetime of using retainedprofit.Ownership of thefunds remains with theowner of the companyonly.Conditionofbankruptcy cannotoccur if retained profitis there. Sale of assetsAt the time of sellingOwnership of theCreditors of the2

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