Financial Resource Management and Decision-Making: A Case Study Report

This report provides a comprehensive analysis of financial resource management and decision-making, using Marriott International as a case study. It begins by identifying various sources of finance, including bank loans, debentures, and retained earnings, and assesses their implications. The report evaluates appropriate financing options for business projects and analyzes the associated costs. It emphasizes the importance of financial planning, detailing how it is undertaken and its impact on financial statements. Additionally, the report examines the information needs of different decision-makers, including managers, stakeholders, and government entities. The report further explores budgeting, unit cost calculation, pricing decisions, and investment appraisal techniques. It also delves into different financial statements, their formats, and the application of ratio analysis to assess a company's financial position. The report concludes with a summary of findings and recommendations for effective financial management.

MANAGING FINANCIAL
RESOURCES & DECISION
MAKING

Table of Contents
INTRODUCTION...........................................................................................................................3
Task 1...............................................................................................................................................3
LO1..................................................................................................................................................3
1.1 Identify the sources of finance available to a business.................................................3
1.2 Assess the implications of the different sources...........................................................4
1.3 Evaluate appropriate sources of finance for a business project........................................5
LO 2.................................................................................................................................................5
2.1 Analyse the costs of different sources of finance.........................................5
2.2 Explain the importance of financial planning and provide details of how financial
planning undertaken...............................................................................................................6
2.3 Assess the information needs of different decision makers.............................................7
2.4 Explain the impact of finance on the financial statements. Describe how different sources
of finance identified can influence the appearance of the financial statements.....................7
LO 3.................................................................................................................................................8
3.1 Analyse budgets and make appropriate decisions............................................................8
3.2 Explain on the calculation of unit cost and make pricing decisions.................................8
3.3 Investment appraisal techniques.......................................................................................9
TASK 2..........................................................................................................................................11
4.1 Different Financial Statements.......................................................................................11
4.2 Formats of financial statements for various kind of business........................................12
4.3 Ratio Analysis................................................................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Financial resources are very significant aspect for an entrepreneurship so, it is very essential
for a firm to manage their funds for the aim of carry out their day to day operations effectively. It
lay down the organisation towards the achievement if they properly utilize their funds in desired
way. It can be managing if the company invest only into the profitable areas by optimum
utilization of financial resources (Smith, 2014). The present report is based upon Marriot
international that adopts only appropriate source of funds. Further, various type of ratio is
calculated of a firm that shows their financial position in regards of solvency, liquidity and
profitability. There will be also discussion on significance of financial planning that helps firm to
effectively distribute funds in each department. Apart from this, the report will also cover each
aspects of financial resource and understand cost of each source of funds.
Task 1
LO1
1.1 Identify the sources of finance available to a business
There are various sources available for the Marriott International Inc. which can provide
long and short-term finance to the company. The company uses the sources to increase the firm
capital, pay wages to employees and for future investment. For the company, the financial
assistance is provided by bank, debentures, hire and retained purpose, share and venture capital.
 Bank loan: The company takes the finance from banks at definite interest rates or by
submitting the shares to the bank (Anderson and et.al., 2015). For this purpose, mostly
fixed inter rate is chosen by the company. This is because floating interest rate value
changes according to market.
 Debentures: Here financial sources are general public. From them debt is taken and
interest is paid at regular interval.
 Hire purchase: A short term finance which the company gets by taking assists on
agreement and payment is paid.
 Retained earnings: For the following purpose company uses the internal sources where
earning is generated after reducing all expenses.

 Share capital: Shares are sold in the capital market. The stock price is determined by
stock market through certain rules and criteria. If the prices are high the company is
having profit and if prices of share are low then company is having losses.
 Venture Capital: Large and establish firms provide the finance to the company. In return,
the company share some of the shareholding to firm.
1.2 Assess the implications of the different sources
As the company needs to deal internationally so company needs to make the following
implication:
Financials
sources
Pros Cons Lawful Finance cost
Bank Loan Firm has no
reduction of control
Floating interest
can be risky
Legal authorities
and formalities
are undertaken by
bank.
Interest paid to
the bank
Debentures Company don’t
need to ask
someone else for
the finance
It depends on the
expenditure of the
firm
Company own
rules and
regulation are
needed to be
followed.
Initial cost of the
finance is the
interest paid.
Hire
Purchase
In installation, the
assists are paid
which offers less
burden to the
company
When interest is
paid till then new
advance
technology may
developed
The owner of the
company sign’s a
contract.
Price is paid as
the rising capital.
Retained
earning
Finance price is not
required
Hike in the
opportunity cost
No legal
document
required
Opportunity cost
is paid by the
firm
Shares Finance cot is
decided by the
company market
If prices are low,
shareholder may
leave the company
Legal and formal
regularities
needed to be
Company pays
dividend on
shares

position completed
Venture
capital
Investment can be
made according to
the need
Shares are shared
along with interest
Legal contract is
signed by venture
and the company
Shares price and
interest gained by
the company is
shared
1.3 Evaluate appropriate sources of finance for a business project
The Marriott International Ltd. being a lodging company and having worldwide network,
so company needs to identify those sources and raise the money from banks, shares and ventures.
Bank are considered to be best source for the company along with retained earnings. Through the
fixed capital interest from the bank company can easily raise its capital. Moreover, support from
the company own finance can help the firm to increase its profit and there will be no requirement
of paying the debts or interest to others. As both the sources are considered to be the best for the
firm. If company have opted for the other option like shares, ventures or debentures then the firm
needs to pay the interest or opportunity cost to them. This could lead to more loss to the
company. Government have also issued the laws for which banks have to issue money at low
fixed interest rates for firm development. So, Marriott International have to make strategic
planning in order to expenditure and increase the retained earnings.
LO 2
2.1 Analyse the costs of different sources of finance
As Marriott International, is the global company so they need to identify the appropriate
sources for the financial support. For this purpose, following are the sources which ae considered
as the best sources:
1. Bank Loan: For the entrepreneurs, banks are considered as the best source for taking the
financial support. Banks provide the loans on the two interest rates. This two types of
interest are fixed and floating. In fixed interest rates the bank provides the interest which
is fixed through the loan period (Epstein and Buhovac, 2014). In floating interest period,
the interest provided by the bank changes according to the financial condition and stock
market. For the firm, the best is fixed interest loans. Due to the increase in the prices of
the floating interest rate, company may have to pay more than they have taken the loan or

which is paid through fixed interest rates. In fixed interest rate, there is no changes even
if the economic changes have taken place.
2. Retained earnings: In simple word, it is the savings made by the organization. Retained
earnings are calculated as the difference or the money left after all the expenses are paid.
This is considered as the best source for the company, there is no need to pay the finance
for this source. But as the price depends on the expenditure anthem cost of the raw
product keeps changing which can greatly affect the retained earnings. Being the best
source it is not as reliable as the banks. In order to get the benefits from the retained
earnings, company needs to invest in proper ways and strategies are required for the
proper investment.
Both the factors together can reduce the dependency of the organization to the other external
source. This could benefit the organization as their operational and interest cost are saved to
better extent.
2.2 Explain the importance of financial planning and provide details of how financial planning
undertaken
For the entrepreneur, financial planning is required for the development for the company
and proper investment. Through this methods company uses it to raise then funds. In expending
the business or providing more services to the customer, company uses the funds. Through this
company can launch the hotel to different places (Epstein and Buhovac, 2014). This would
require the expenditure on the capital, building infrastructure, for the labour, employees and legal
documentation. If financial planning is not made properly then company may face great loss. For
the development of the financial planning proper strategies are made by the stakeholder and
manager of the company. For this fund should be systematically used and in proper place.
Moreover, company should consult each member of the company so chances of loss gets
reduces. Through the systematic allocation of the fund the price can be saved more effectively
and efficiently. Through this, the company can make more retained earnings as the investment is
made in sustainable ways. Moreover, it helps to utilize all the resources in best ways. Further,
accountancy system can help in making the financial planning more effective. Financial planning
ensures that funds are available to the company at the time of requirement.

2.3 Assess the information needs of different decision makers
For developing the business, following are allowed for making discussion:
1. Managers: Managers are required for making the important decision in the company.
They are required for making the strategic planning in legitimate manner for the
organization. The strategy involves the place where money needs to be invested or
deposited. Manager helps the organization to make the investment in the market and have
better growth than competitors (Drury, 2013). They provide the business overview and
direction to the firm. Their decision makes the proper investment for the organization.
2. Stakeholders: this are the person who make the investment in the firms. Financial details
are required by them so they are ready to invest in the firm and support to their growth.
They provide the debt to the company. Details like income statement, bank pass book,
data book, balance sheet are required by them. Through this they identify the firm
position in the market and then only they make investment.
3. Government: they require the financial details as they need to identify that company has
paid the tax and firm is not indulge in any illegal activates to make money.
2.4 Explain the impact of finance on the financial statements. Describe how different sources of
finance identified can influence the appearance of the financial statements
Cash collection, capital ‘s equity, sales, cost, purchase, expense, lending and borrowing
are the things which create impact on the financial statement. While preparing the financial
statement sales are needed to be recorded first as they generate revenue and are associated with
the cost of goods and sold (Finkelman, 2015). It’s related to the net profit of the firm. Second is
collection of debt from customers. This reduces the account receivables and hike in cash. This
provides hike in capital. Moreover, total decrease when capital invest is done by the owners.
When company issue new shares the price of dividend decreases. All this factor create impact on
the finance of the financial statement.

LO 3
3.1 Analyse budgets and make appropriate decisions
Budget: It is that type of report that is used by company for the purpose of allocating their
financial resource in most effective manner. There are various types of budgets that
includes sales budget, material budget, cash budget, master budget and operational budget
etc.
Importance of budget
It is more significant for the Marriott international that helps them to set the plan so, they
can effectively execute activities. The importance of cash budget is that it helps the
company determine their financial position by comparison of sale figure from the previous
year. The significance of this is that it effectively allocating the funds that helps them in
attaining the results in desired manner (Dekker and et.al., 2013).
3.2 Explain on the calculation of unit cost and make pricing decisions
Unit Cost is that of cost that are mainly incurred through the organisation at the of
manufacturing a goods or services.
Particular Unit cost (£)
Direct cost 8
Indirect cost 2
Total cost 10
Mark up is 40% 4
Value added tax
(20%)
2.8
Price 16.8
Currently price
charge
16
The Marriott international company calculating Unit cost that is described as follows: -
Unit cost= direct cost+ indirect cost
10=8+2
Selling price= 140%

From the above data, it has been analyzed that the company selling price is 16 and the
profit mark up is 40%. The company wants to set the price of goods or services through which it
earns maximum profit by minimizing its cost. In regard to above, it has been concluded that the
Marriott earn maximum profit at the selling price of 140% and keep the profit margin at 40% for
their products.
3.3 Investment appraisal techniques
The investment appraisal techniques involve various methods that are adopted by company
for the purpose of make investment decision. The firm mainly applied the approach to determine
which project will more returns for their investment (Stadtler, 2015). The Marriott international
adopts various tools of investment appraisal that will be described further below: -
 Net present value: It is that type of methods that show the company’s profitability by
subtracting net present cash inflow from the initial investment for a particular time
period. The investment decision on project will be taken in this method if the NPV is
positive and the highest NPV is better for a company. It gives a higher return for their
investment into the projects.
Project A
Project B

3.3 Interpretation: On the basis of above two proposal of a Marriot international hotel in which
the proposal 1 the net present value is 491 and the cash outflow that is 1691. Beside this, the
second proposal NPV is 529 for the year 5 years and the company initial investing into these
projects that will be 1729. Therefore, from these data and figures it has been interpreted that the
company should choose the 2 proposal that will provide a higher return.
 Pay- back period: It is that type of capital budgeting decision making in which it shows
the duration of project completion time. The investor of a company will invest into that
specific project whose pay-back is shorter among the available option.
Project A
Project B

Interpretation: From the above report, there are two projects available for a company in
which they can invest their amount. The shorter pay period is preferable for an
organisation in which the project 1 that will take 1.5 year for completion. Beside this, the
pay period of proposal 2 that will take 3 years. It has been recommended to the Marriot
hotel to invest into the proposal 1 that gives them a higher return if they invest in this
project (Dekker and et.al., 2013).
TASK 2
4.1 Different Financial Statements
Financial statements are the record of the financial operations carried out in a company.
Generally, they reflect the financial results of a business. Marriot International can look at their
performance by analyzing the financial reports. Following are the types of financial reports
which are as follows: -
 Income Statement
These types of financial statements show the performance of the company in terms of profit
and loss for a period of time. They can also be called as profit and loss statements. Revenues,
expenses, profit and losses are highlighted in this and are considered as most important
statement.
 Balance Sheet
It is the statement of the financial position of the Marriot International and is of a specific
point in time (Stadtler, 2015). It generally represents assets, liabilities and entity of the
company. Assets are things which a company controls like cash, inventory and machinery.
Liabilities are something a business owns to someone like bank loans. Equity is the business
owns to its owners or it is amount of capital that remains after its assets are used to pay off its
outstanding.
 Cash Flow Statement

As the name suggest it is an overview of the movement of the cash in the business activities
over a period of time. Whatsoever cash inflows and outflows are shown in such type of
statement. When amount of cash flows is not shown in profit and loss statement then such
document is used. A comparison can be made by keeping this in context.
 Statement of the Retained Earning
Also referred as statement of changes in equity as it represents change in equity during
particular period. It includes share capital issued during the period, dividends payments,
gains and loses recognized directly in equity. This statement is not used much by the
companies and is only taken out in the audited financial statement package.
4.2 Formats of financial statements for various kind of business.
Financial statements of a company show the flow of money like where it came, where it went
and where it is now. All the business uses this to handle the business operations and activities,
not only the businessmen use this but other like the bank managers also use such type of
statements. So, it becomes very important that these statements are accurate and reliable.
 Financial statements by Information type
Balance sheet provides an overview of the company’s status at end of the year. How much
revenues they have earned in an accounting period. Any document of cashflows shows whether
cash inflows and outflows during a given period (Graham, Harvey and Puri, 2015). All business
yields cash through operating, investing and financing operation and require it paying expenses,
repaying loans and assets. Statements of the owners’ equity explains changes in retained earnings
during the accounting periods. Retained earnings appear on the balance sheet and represent the
difference between retained income and withdrawals.
 Financial Statements by GAAP Type
In the GAAP hierarchy, internal financial statements are prepared by the company and is of
lowest quality. They cannot be relied upon as lack management purpose. Public Accountant who
has a certificate prepares complied statement and whatever they prepare is based on the
information given by their clients who holds a business. Banks and lenders may consider those
statements prepared by them but they cannot be fully relied upon. They are not much taken in
accountant as whatever information given by them can be false information also. They are

expensive as compare other as it involved other extra work and lenders generally feel more
comfortable with them than compilations. All the audited financial statement is at the top of the
hierarchy as certified vouches formally that they conform entirely to GAAP.
4.3 Ratio Analysis
Income statement is that financial statement that shows company’s financial position for a
particular time period. It can be also known as profit and loss account that shows the statement of
operation in terms of revenue and expenses (Finkelman, 2015.). Therefore, below the Marriott
hotel’s financial position is assessed through ratio analysis. It will be described as follows: -
1) Current ratio: It is that ratio that shows relationship among the company’s current
assets and current liabilities through which they assess their liquidity.
Statements showing computation of Current ratio:
Year Current Assets Current liabilities Current Ratio
2014 1610 3038 0.529953917
2015 1384 3233 0.42808537
Interpretation: From the above data of current assets and current liabilities of a Marriott
company is give. In regards to this, the current ratio for year 2014 is 0.53 and 2015 that is 0.42
by comparing both it has been concluded that for the better current ratio for the year 2014.
2) Operating profit ratio: It is that type of profit in which the company can able to
understand how well they operate their business that contributing towards profits.
The operating profit margin is ascertained by dividing the sales revenue from the
operating income.
Statements showing computation of Operating Profit Ratio:
Year Operating Profit Revenue Operating Profit Ratio
2014 12637 13796 91.59901421
2015 13136 14486 90.68065719
Interpretation: From the above data and figures that shows company’s operating profit ratio for
the year 2014 and 2015 that is 91 and 90 respectively. Under this statement it has been analysed
by comparison of both operating profit margin in that it concluded the firm’s financial
performance is better for year 2014.

3) Debt equity ratio: It is that type of ratio which is used by company for the purpose
of determining their financial leverage. It is calculated by dividing a firm’s total
liabilities through the stockholder’s equity (Guerrero, Maas and Hogland, 2013).
Statements showing computation of Debt Equity ratio:
Year Debt Equity Debt Equity ratio
2014 3447 -2200 -1.566818182
2015 3807 -3590 -1.060445682
Interpretation: From the above data, it has been interpreted that the debt equity ratio for the
year 2014 is -1.566 and for year 2015 that is -1.060. In regard to this, it has been analysed
from the debt equity ratio in which the maximum one is better. Therefore, by comparing both
it is evaluated that the better financial position of firm for the year 2014.
CONCLUSION
From the above assignment, it is concluded that for a company managing financial
resources are very important. Through this they can control the flow of money or cash. Whatever
the cash is flowing in the business operation or any use of financial resources, it requires a proper
management to handle it. Marriot International, which is one of the largest hotel chain in UK and
world have to make sure that they regularly come out financial statement. Through this they can
get to know the real situation of their business. Whatever is the profit or loss can be identified
and through this. They have to find out the source from where they get finance because
without financial help no business can expand or grow. While making a business report they
should keep notion of each and every source of finance which has been included in the business
operations. A budget is designed properly so that the entire amount is distributed according to the
importance of the activities. Unit costs are calculated and according to it pricing is done.
Different financial statements are mentioned in the assignment which Marriot International can
come out.

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