Financial Resources and Decision Making: Clariton Antiques Case

This assignment presents a case study on Clariton Antiques Ltd, focusing on its financial resources and decision-making processes. The study examines both internal and external sources of financing available to the company, including family and friends, bootstrapping, bank loans, retained earnings, and equity financing. It explores the implications of using different financing methods, analyzing the advantages and disadvantages of each, such as the impact on growth rate, competitive position, and control. The case study also identifies the most suitable financing sources for Clariton Antiques Ltd, differentiating between equity and debt capital and discussing factors relevant to small business growth. The assignment provides a comprehensive overview of financial management, offering insights into capital acquisition, resource allocation, and the strategic choices businesses must make to achieve their financial objectives. The case study provides a deep dive into the financial decisions of Clariton Antiques Ltd and how they affect the company's financial health and overall success.

Financial Resource and Decision Making; Case study
of Clariton Antiques Ltd

Task 1; Financially sources;
A.) Unincorporated Business
Internal source of capital
Family and friends
Regularly, the principal check originates from a family member or a friends. In principle it is a
considerable measure less demanding to close them since they definitely know you. By and by in
some cases this is clumsy, and may prompt to unbalanced circumstances later on. Think
deliberately before taking cash from family and friends (Connolly, 2006). Each circumstance is
distinctive. Something else is that loved ones may not plainly comprehend the risk and how new
companies function. Set aside the opportunity to instruct them, and on the off chance that they
get it and still need in then you are all evident.
Bootstrapping.
Self-subsidizing from your funds (in the event that you have it) is constantly favoured. Focal
points: no time going cap close by to financial specialists and you don't need to give up any
control in your organization. For additional on the best way to bootstrap, look at Bootstrap
Business by Rich Christiansen, who has propelled about 30 organizations by that technique.
External sources
Advances or loan extensions.
If the organization needs just a transitory or little imbursement of cash, strive for a Small
Business Administration advance (offered at a lower loan cost since it is ensured by the

legislature) or a bank loan extension. Cautioning: Commercial banks are regularly pretentious of
new businesses unless you have individual security at risk–say, your home.
Focus on a noteworthy client.
A few clients would take care of your improvement costs keeping in mind the end goal to have
the capacity to purchase your item before whatever remains of the world can (Dlabay, 2007).
Their preference: control over your generation procedure (to ensure it meets their prerequisites
and the guarantee of committed support. Indeed, even substantial organizations look to their best
clients to subsidize new projects–this is the pith of good business improvement.
B) Incorporated business
Retained Earnings
Retained Earnings are a simple source of internal financing to utilize in light of the fact that they
are fluid Assets. Retained Earnings are the part of net income that you have held in your
organization and not paid out. In an independent company, Retained Earnings are generally paid
out to the proprietors, who regularly don't draw a planned compensation. Rather than income in
out held income, you can reinvest them into the organization.
Current Assets
Current Assets comprise of cash or anything that can undoubtedly be changed over into cash. For
instance, if your business has stock ownership s in different organizations, you can strip yourself
of those stocks and utilize the returns as a source of financing. You ought to be cautious, be that
as it may, not to diminish your present Assets for levels not as much as your present liabilities, as
this may keep you from income in off your debts.

Settled Assets
Settled Assets are those that are not effortlessly changed over to cash. Regularly, these
advantages incorporate hardware, property and industrial facilities. Since these advantages set
aside opportunity to change over to cash, they can't be depended on for here and now access to
back. In the event that you have room schedule-wise, nevertheless, you could — for instance —
auction some gear or even property to put Assets into your business. This is especially helpful if
your require statement s have outgrown some of your settled Assets for instance, in the event that
you have to buy more up to date gear.
Individual Savings
Individual investment funds are the foundation of many independent companies. In the event
that your business doesn't have the advantages for fund your venture, you may nevertheless have
individual funds that you can add to the business (Ehrhardt, 2016). This gives a contrasting
option to looking for outside financial specialists or loans and permits you to hold control over
your business.
External sources
Bank Loans
One of the essential sources of external financing for independent ventures is bank loans. The
organization presents a loan application to a bank, investment funds and advance or other cash
related foundation. The application incorporates the reason for the advance, the sum asked for
and information on the organization's financial record. The bank dissects the information,
favours or decays the loan application and decides the financing cost on the advance. In the event

that the organization neglects to reimburse the key and enthusiasm within the recommended day
and age, the bank can guarantee any insurance the organization gave to secure the loan.
Bond Issues
Rather than applying for a bank advance, little organizations can likewise issue bonds for debt
financing. For organizations required in mechanical advance statement , the Industrial
development Revenue Bond (IDRB) program works with nearby govern statement offices to
income for large modern undertakings. Organizations that get IDRB endorsement are permitted
to issue bonds and make them accessible to private financial specialists. The organization must
reimburse the central and enthusiasm on the cling to the nearby office, which dispenses the
returns to the financial specialists.
Angel Investors
Organizations that would like to stay away from the liabilities that c0omes with debt financing
can acquire extra capital by equity financing. One wellspring of equity financing is the alleged
"holy messenger speculator." These capitalist add to enhancing the gear capital, showcasing
systems and industry information base in return for little bits of equity of the objective
organization. Consequently, heavenly attendant financial specialists search for organizations
with high potential or more normal rates of degree of profitability (ROI).
Venture capital
Another prominent type of equity funding is Venture capital. Financial capitalist discover
organizations with promising development potential and offer to put Assets into trade for a
generous share of the proprietorship (Dlabay, 2007). Funding firms have admittance to the cash
and aptitude many developing firms need to achieve their maximum capacity. Since funding

firms convey both capital and aptitude to the business, they likewise frequently put their industry
specialists in control of their objective firms.
1.2 Implications regarding using of;
A.) Financing from internal sources
Sources as different as cash and capital by family and friends to begin a business and in addition
business people's finances can be essential assets for inventive business people. Private
wellsprings of subsidizing are regularly basic for new businesses since information asymmetries
frequently render access to back on business sectors troublesome. They can help business people
acquire debt financing, alongside subsidizing from funding and business blessed messengers.
Open arrangement can assume a part by setting up insolvency controls so that imaginative
business people will be additionally eager to put Assets into creative organizations.
Large firms with various divisions can subsidize their development interests in one division,
regardless of the possibility that another one, with held income from different divisions. For this
situation, corporate central command apportions rare financing crosswise over various divisions
in an inner capital market, utilizing an assortment of systems to choose what contending ventures
to finance. The significance given to development exercises will be especially basic in this
specific situation.
Also, the competitive business environment can affect what size of internal source of financing
are accessible for development. Firms can recover the settled cost of putting Assets into
improvement by offering the subsequent item at an equity that is higher than the negligible cost
of delivering it. Firms utilize an assortment of methodologies to support this increase, for
example, utilizing licensed innovation (e.g., patent the development), first-mover advantage.

Nevertheless, these techniques are not generally fruitful practically speaking, so if markets are
exceptionally aggressive it can be hard to support an increase to take care of the cost of the
improvement procedure (Industrial Systems Research , 2013). Without competition there is next
to no weight to advance, yet with an excess of competition financial specialists might be hesitant
to subsidize inventive action in the event that they expect that regardless of the possibility that
fruitful it will be hard to catch the advantages of this achieve statement
B) External source of fund
Expanded Growth Rate
Outside financing can help your private venture develop at a speedier rate than utilizing just
within assets. Development in deals normally requires extra interests in stock, records of sales
and different Assets. Your inward financing can bolster this extra investment just up to a
specific call attention to you come up short on cash. For instance, accept your independent
venture can deal with just 15 % yearly deals development utilizing just inward supports. With
outside financing, you may achieve a 25 % or higher deals development rate every year.
Aggressive Position
A business frequently needs to burn through cash on different things, for example, new
innovation or item research, to stay focused. Outside financing can help with this cost s. Without
outside financing, you may need to do without imperative investment s and activities that you
can't manage, which can give better-subsidized contenders the high ground. For instance, without
outer financing, you may depend just on referrals for new business, however with outside
financing you may have the capacity to bear the cost of a publicizing effort that expands your
nearness.

Yield
Outside financing doesn't come free you need to surrender something to get it. When you utilize
equity financing, you give up a segment of your proprietorship stake in your organization and a
share of your benefits. Stockholders can likewise vote on imperative organization choices, which
can lessen your control. Likewise, banks commonly require intermittent premium income
statement. In spite of the fact that they don't have ownership in your business, they have a
fractional claim on your advantages until you reimburse your debts.
Included Scrutiny
Before you can acquire outside financing, you ordinarily should give an extensive rundown of
information to potential speculators and loan specialists (Industrial Systems Research , 2013). On
the off chance that they give you cash, these gatherings may likewise oblige you to occasionally
give income statement s so they can screen their venture. Information about your organization
that you already minded your own business will be open for evaluate by outside gatherings. You
will probably invest extra energy and bring about added cost s to meet their solicitations.
1. Three the suitable sources of finance for Clariton Antiques Ltd.
Capital is the business term for cash acquired and utilized by an organization. It is required first
to purchase the hardware a business requires to begin, however there must be sufficient
accessible to income the progressing costs brought about by the organization. Development
capital is cash an organization uses to income for the cost s of growing the business with the goal
that it can make more deals and create a more elevated amount of benefits. Following are
cheapest sources of capital which are used by Clariton Antiques ltd

Equity versus Debt Capital
Equity capital originates from the offer of proprietorship pieces in the organization. A private
company may offer shares to financial specialists or convey on speculator partners to give cash
in return to ownership and sharing of future benefits. Debt capital is obtained cash. A private
venture can assume debt through bank loans or advances from financial specialists or proprietors.
Debt capital requires general interest income statement and the possible reimburse statement of
the sum obtained.
Develop Your Own Equity
The slightest costly approach to expand the equity capital in an organization is through held
income. This is the bookkeeping term for benefits that are not paid out to proprietors or
shareholders but rather are rather kept in the business to store operations and development
(Harold Bierman, 2003). Held profit gives the advantages of expanded capital without the
negatives of different types of raising capital. Reinvesting a bit of business benefits permits an
organization to keep on growing without acquiring cash or offering shares of ownership.
Private venture Growth Factors
For private venture, holding profit might be an intense decision for the proprietors. Most private
ventures are go through organizations for assess statement purposes, so proprietors will income
imposes on the benefits, regardless of the possibility that some of those benefits are not paid out
as profits or benefit dispersions. Likewise, financial specialists regularly need an arrival on their
cash, so the overseeing ownership may need to offer holding income to give future development
of benefits, which will profit a wide range of proprietors.

Task 2
Analyse the costs of the two sources of finance under consideration
Chief finance executive has briefed some sources of fund after seeing the occurrence of Clariton
Antiques Lt.First is the to hire the capital from outside sources at the rate of 10% interest for 5
years or second to hire the capital from the business as 0.5 million for 20% stake. Share capital
of the business is one hundred fifty.All the sources from which capital can be raised has it’s own
method,income statement and instructions for business.In case of changing the cost of the
undertaking company is like in starting the loan income statement is 2% and further it is
dependent upon the conditions of trade subjects as per the skill.As after completion of first 365
days .ten thousand pounds of interest cost will be paid before assess statement of £470000 out of
normal advantage without harming the cash position of the business.
2.2 Defining the importance of financial planning for Clariton Antiques Ltd
Cash Manage statement
Many organizations have Monthly or occasional changes in incomes, which convert into periods
when cash is abundant and times when cash deficiencies happen. In building the budgetary
arrange statement; the proprietor considers these cycles to keep a tight rein on consumptions
amid the figure low income periods. Poor trade administration can come about out negative
results, for example, not having the capacity to make finance. Having a budgetary arrangement
that is organized so there is dependably a cash pad helps the entrepreneur rest better during the
evening (Sarnat, 2007). The cash pad permits the business to exploit openings that emerge, for
example, the opportunity to buy stock from a provider at briefly decreased costs.

Long-Range View
The cost of going for short term loan is that the proprietor may not invest enough energy
arranging what should be done to develop the business long haul. The cash related arrangement
, with its forward looking concentration, permits the entrepreneur to better observe what uses
should be made to stay with the on a development track and to remain in front of contenders.
The cash related arrangement is a plan for ceaseless change in the company.
Spotting Trends
Within a period of month an entrepreneur has a large number of options as he can’t
predict which option will give the positive result to achieve the result or which option is not good
or will not work. Arrangement of cash should be done through quantifiable focuses so that
outcome may come in between the year. The proprietor can judge that extension of promoting
uses prompted in skip the deals. How to distribute the advertising dollars by proprietor will be
done with the help of slope in the offers of individual items.
Organizing Expenditures
Basic feature of growth in the company is saving the assets which can be easily converted into
cash. Entrepreneur will recognize the vital uses through the budgetary arranging process, those
that who achieve the fast changes in profitability, performance or market aggression apart from
those who postpones until and unless they have ample cash. Biggest partnership experience this
prioritization procedure opposing the advantage of proposed consumption on the cost (Sarnat,
2007).

Measuring Progress
Entrepreneurs manage many difficulties and hurdles in early stages of business. It is very hard to
predict about the advances. As entrepreneur require support by seeing his ability and his genuine
outcome. Cash balances are permanently rising in inspiring variable or progress of income step
by step in shown by demonstrating the diagram. Proprietor takes help of cash arrangement to see
the probability of chances of win.
2.3 Information regarding the assess statement will be needed while making decision on
financing the takeover by
a) The partners
Partners have to go through the memorandum or articles of association in order to know about
the company profit sharing ratio, capital structure (Harold Bierman, 2003). For analyzing the
expressions and circumstances near income sharing partners have to audit the notice or article of
relationship. ,in order to know the amount of capital that every associate can add the venture.
Venture capitalist (We Finance Limited)
Business Annual reports are regularly evaluated by the venture capitalists in order to evaluate the
valuation of the company or liquidity position ,to confirm the level of chance that company
bound itself to give consent of advance of 0.5 million.

Finance brokers
For evaluating the company’s overall performance there is a Finance broker in the company who
keeps eye on business activity with side interest on loan and information need in venture’s
income statement apart from either company is improving or getting loss in each financial year.
This is a sign of feature of business appraisal of the extent of liquidity risk that is appropriate for
finance brokers. The appraisal of the business performance will provide a certain level
perspective of the amount of danger interface with the Business and give making advance
concurrence with the business undertaking.
2.4 Financial statements impact on Clariton Antiques Ltd if it choose to go with
Venture capitalist
Investors are in this expression that company will get the advance of 0.5 million, with 20% stake
in the business, so they stopped thinking about introducing the advances in Clariton Antiques
Ltd(Few, 2009).Top managerial staff of the business has lose control over venture and are
assuming risk apart from the suggestion is made on cash that it will yield the profit of the
business .
Finance brokers
Credit of 0.5 million at 2% APR side interest income statement are planning by finance brokers
to give to the Clariton Antiques Ltd. Income and amount of partitioned will reduce as an impact
on financial statement by the venture has control over its voting right. This method of credit is
ideal for the organization.

Task 3
3.1 Cash budget of Clariton Antiques
3.2 Calculation of unit cost to make price decision
Activity based costing is used by company to evaluate the unit cost .Each unit has given the cost
based on the hours needed by worker to complete that task.

3.3 NPV investment appraisal techniques used by company to find its growth
NPV
The company will invest in investment one since the project depicts a high positive NPV unlike
investment two
Income back period, period
Decision require statement s; Accept the assign statement if takes much less 3.5 years

Income back period for investment one is 1, 2 years worked out as follows
(2years+2-1.78/1.35).
From investment two, the payback period is 2.3 years which is worked out as follows
(2years+{2-1.78/1.35)=2.3
From the above table it is clear that investment one is beneficial for investment as it takes 1.3
years to regain the initial capital contributed and thus the interest will be kept in mind while
financing one.
Average Rate of Return

Task 4
4.1 Key factors of financial statements
A company's incomes, gains, costs and liabilities are recorded on the income statement.
Income is cash earned from an organization's typical business operations. The costs on the
income statement are the expenses related with procuring the income (Vance, 2002). At the
point when an organization offers one of its advantages, it can encounter a capital pick up or
liability. Incomes less costs, in addition to increases short liabilities, measure up to net income or
net liability. The dollar measure of net income recorded on the income statement is likewise
found on the cash flows statement under the operating activities section
Balance sheet
The Balance sheet incorporates the components of the accounting equation, Assets equals
liabilities plus shareholders’ equity. The advantages on an Balance sheet are delegated either
present or settled Assets. Current Assets are those assets which can be easily converted into cash
over a short period of time .Settled Assets are not actually assets for some time they names
assets. Current liabilities are those obligation which have to be paid or en cashed within a year.
Long haul liabilities are expected in one year or later. Shareholders’ equity is the aggregate sum
of equity in the firm. The shareholders’ equity section of the Balance sheets clarified in further
detail on the statement of shareholders’ equity.
Cash flow statement
The Cash flow statement demonstrates the measure of cash within an organization. Items that
influence the cash balance are recorded on the statement. The primary segment of the Income

statement n is operating activities, which demonstrates the cash in and out of the organization in
connection to its business operation. The operating activities segments additionally incorporate
net income and the change in dollars of specific records recorded on the accounting report. The
following section, contributing exercises, demonstrates cash the organization got and spent on an
organization's capital ventures (Vikram, 2004). The financing exercises section demonstrates the
inflows and surges of cash identified with the organization's issued income securities, which is
likewise recorded on the Balance sheet and statement of shareholders’ equity.
Statement of Shareholders' Equity
Statement of shareholders equity shows the changes happen in the shareholder equity account.
First line in account of shareholder is the opening balances of common stock, and if any stock is
issued that it will be added to opening balance in order to get closing balance. Same applies to
preferred stock. Next retained income which is to be recorded in balance sheets. Opening balance
of net income is recorded in income statement than balance of retained profit is added to the net
income and profit paid to shareholders get deducted from this in order to get closing
balance(Vance, 2002). For getting aggregate shareholder’s equity closing balance of common
stock or preferred stock and of retained earning will be added together.
4.2 Comparison the format of financial statements of Clariton Antiques Ltd with
partnership
Balance sheet
The Balance sheet, now and again called the statement of financial position gives a preview of
an organization's finance at a point in time. The Assets segment records everything with money
related esteem that the organization has. The liabilities segments records all the organization's

money related commit statement s (Vance, 2002). The equity segments, since its equivalent to
assets less liabilities, list what the owners of the organization really "claim." There's no real
distinction between the way a company presents assets and liabilities and the way a company
does. The equity segment, nevertheless, is diverse in light of the fact that the ownership
structures of companies and partnership are so unique.
Organization Ownership
In organizations, ownership is dispensed by stock, with each share of normal stock speaking to
an equivalent share of proprietorship. On the off chance that you have a fused business with, say,
1,000 shares of stock, then each share speaks to responsibility f of 2/2,000th of the organization.
For some joined private companies, all the stock is in only a couple hands. Yet, in principle, an
organization could have the same number of proprietors as there are shares of stock. In an
company, by differentiation, the proprietors are a constrained gathering of individuals who have
chosen themselves the amount of the organization each partnership possesses. This choice is
generally in light of how much cash each has put into the organization.
Corporate Equity Section
The equity section of a corporate accounting report has two primary segments: contributed
capital and held profit. Contributed capital is the cash the organization has gotten from offering
its stock. Once in a while these stock deals are to general society. With many fused independent
ventures, nonetheless, the authors put their cash into the business and get stock consequently.
The cash they put in is called "contributed capital." Retained income is the gathered benefits of
the organization since it was established, less any profits it has paid to shareholders. The equity
section likewise regularly reveals what number of shares of stock the organization has
extraordinary. Each remarkable share speaks to an equivalent cut of the organization’s equity.

Partnership Equity Section
The equity segment of an organization's Balance sheet has a different arrangement of sections
for each partnership. In a common setup, each partnership has a "capital record" and a "current
record." The capital record is cash the partnership has put into the business. Benefits. At the
point when the organization closes its books for a year, it decides how much benefit it made that
year. It then disseminates that benefit to the partnership s' present records in view of their share
of proprietorship. Each partnership’s present record is diminished by any "drawings" the
partnership has produced using the organization. Proprietors are qualified for take a portion of
the organization's benefits for individual utilize. When they do as such, it's a drawing, and it
leaves the present record.
4.3 Interpreting the recent financial statement of Clariton Antiques Ltd using appropriate
ratios and making comparison with the previous year
From the above analysis it is clearly depicting that business is improving its financial health.
This is due to the expansion in current, proportion and quick ratio which shows that business
have enough fund to pay when they fall due. Ventures are proving to be beneficial for investors
as they give guaranteed returns on capital invested in company as third is predict by regularly
increasing of ROE and ROA.