Financial Analysis of XYZ Ltd.
Added on 2020-01-15
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MANAGING FINANCIALRESOURCES ANDDECISION MAKING
Table of ContentsMANAGING FINANCIAL RESOURCES AND DECISION MAKING......................................1INTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Sources of finance available with different business units....................................................11.2 Implication of various sources of finance..............................................................................21.3 Case-study examples.............................................................................................................3TASK 2............................................................................................................................................32.1 Cost of different sources of finance.......................................................................................32.2 Key aspects of financial planning..........................................................................................42.3 Information needed by decision maker..................................................................................42.4 Impact of finance on financial statements.............................................................................5TASK 3............................................................................................................................................63.1 Findings and recommendation for the budget analyzed........................................................63.3 Viability of a project using the investment appraisal techniques..........................................63.2 Calculation of unit cost..........................................................................................................7TASK 4............................................................................................................................................94.1 Main financial statements......................................................................................................94.2 Financial statements for different business type..................................................................104.3 Calculation of various ratio.................................................................................................10CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12APPENDIX....................................................................................................................................133.3 Calculation of payback period (In £).......................................................................................133.2 Calculation of unit cost............................................................................................................144.3 Ratio analysis of XYZ ltd. are as follows:...............................................................................17
INTRODUCTION Finance is the science that describes the management of all activities related to banking,investment, money and credit. It can also be said as the management of all the funds which flowsfrom inside and outside the organization. The following report interprets about various sources offinance available to different business organization for the fulfillment of variety of needs. In this,implication of finance as resources within a business is discussed. Further, cash and sales budgetare also analyzed in order to analyze cash flow forecast. By using various techniques an attempthas been made to select best project out of the given project. In this, per unit cost of the companyis also calculated. At last, various ratios are calculated in order to find out the actual position ofthe business.TASK 11.1 Sources of finance available with different business unitsThere are various sources of finance available in world which aids various organizationsto meet requirement of funds. Some of the sources of finance for different organization are asfollows: Large and small business organization: - Large business organization can raise theirfinance by issuing equity shares to the general public. By using this method, company is able toraise large amount of finance within a short period of time (Brigham and Daves, 2012).Similarly, Small business organization can raise their funds by approaching various financialinstitutions or by taking bank loan. This is one of the cost effective ways to aid variousorganization in order to raise its funds.AdvantagesBy issuing equity shares company can save its floating cost.Company will be able to avail the tax deduction benefit if they raise their funds throughbank loan.DisadvantagesCompany is required to pay high rate of interest to the bank in order to raise financethrough loan which in turn increases the liability.Voting rights need to be given to the shareholders in various decision making processwhich in turn can affect decision of the company (Brigham and Houston, 2011).1
New business start up: - Personal saving of the individual can be used to start up a newbusiness. At the same time, owner of the company can raise its fund by taking financialassistance from friends and family members. AdvantagesAn individual does not face any problem in terms of monthly or annually interestpayment.DisadvantagesInterference of family members in the company affairs can sometime lead to the personalproblems.Expansion of the business: - In order to expand a business, company can use the Retainedprofit available (Chandra, 2011). It is part of the profit which is kept as a reserve by the companyin order to meet various financial needs which can arise in the near future.1.2 Implication of various sources of financeSourcesLegal aspectsCostSuitabilityIssue of equity sharesIf the organizationissue shares than theyneed to follow a legalprocedure. At the sametime voting rights needto be given to theshareholders (Drury,2013).Company is requiredto incur the floatingcost at the time ofissuing shares whichin turn increases thecost of the company.It is the most suitablemethod of raisingfinance for the largesized organization inorder to meet theirvarious requirements.Bank loanBank has the full rightto cease the collateralsecurity if company isnot able to makepayment of loan.Bank charges highinterest rate ascompared to otherfinancial institution. Inlieu of which cost ofthe companyincreases.This source is mostsuitable for the smallsized organization inorder to meet itsvarious needs.Friends and familymembersThey are the owner ofthe company in lieu ofIn order to takefinancial assistanceThis method is suitablefor starting up a new2
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