Report on Managing Financial Resources for Clariton Antiques Limited

This report delves into the financial resource management of Clariton Antiques Limited, a partnership firm planning expansion. It identifies various sources of finance, including unincorporated and incorporated options like hire purchase, venture capital, leasing, partnership, and bank loans. The report assesses the implications of each source, evaluating their advantages and disadvantages, particularly for partnership and venture capital. It analyzes the costs associated with different finance sources, emphasizing the importance of financial planning, and assessing the information needed for financing decisions. Furthermore, the report examines cash budgets, unit costs, pricing decisions, and investment appraisal techniques to evaluate proposed ventures. Finally, it discusses key components of financial statements, compares statements across different business organizations, and interprets relevant financial ratios, providing a comprehensive overview of financial management practices.

MANAGING FINANCIAL
RESOURCES

TABLE OF CONTENTS
INTRODUCTION..........................................................................................................................................................1
TASK 1...........................................................................................................................................................................1
1.1Identifying the sources of finance which is available to business........................................................................1
1.2Assesing the implications of different sources ....................................................................................................2
1.3Evauating the most appropriate sources of finance in business ..........................................................................3
TASK 2...........................................................................................................................................................................4
2.1Analysing the cost of two different sources of finance........................................................................................4
2.2Importance of financial planning with respect to Clariton Antiques Limited .....................................................4
2.3Assesment of the information that will be required to make decisions on financing...........................................5
2.4Explain the impact on the financial statements of Clariton Antiques Limited....................................................6
TASK 3...........................................................................................................................................................................7
3.1Analyse the cash budget.......................................................................................................................................7
3.2Assessing unit cost and making pricing decisions...............................................................................................9
3.3Evaluating the viability of proposed by using investment appraisals techniques .............................................10
TASK 4...........................................................................................................................................................................2
4.1Discussing key components of financial statements............................................................................................2
4.2Comparing the financial statements of the different types of business organisation...........................................3
4.3Interpretation of ratios..........................................................................................................................................3
CONCLUSION...............................................................................................................................................................3
REFERENCES................................................................................................................................................................4

INTRODUCTION
Management of finance is considered as an important part of business which is highly
required to get success in the competitive environment of business. In an organisation, there is
need of appropriate amount of funds for the purpose of implementing different plans. Other than
this, business enterprises are required to focus on carrying out optimum utilisation of the
financial resources (Albrecht and Steinrücke, 2016). Present report is based on Clariton Antiques
Limited which is offering different types of antique products to large number of customers. The
stated business is started by four partners in London and it is planning to launch another branch
in Birmingham for earning high level of profit. The report will provide clear understanding of
different sources of finance that are used by the partnership firm. Other than this, it will also
describe importance of tools of capital budgeting along with financial planning for making
decisions.
TASK 1
1.1Identifying the sources of finance which is available to business
In the given case scenario of Clariton Antiques Ltd, it requires 0.5 million pound to
expand the functioning and operations of the business. In context of this, there are some of the
sources of finance which are available to unincorporated and incorporated businesses and are
described below:
Unincorporated business-This type of business are established by one or more people to attain
some of the goals and objectives (Baños-Caballero, García-Teruel and Martínez-Solano, 2014).
Hire purchase-It is considered as another source which can be adopted by the sole traders. In
this, at the time of starting business unit they can take possession of assets by making down
payment. The payment is made by them in instalments with an aim to carry out smooth
functioning of business.
Venture Capital- In order to raise fund, the business can approach venture capitalist. They are
the one who invest their money in business which is highly profitable as well as growing.
Therefore, with the help of venture capital, the business unit can implement their ideas.
Leasing- For the purpose of starting a venture in unincorporated business and in this all of the
activities are node by taking assets on lease. Moreover, it provides opportunity to business for
making use of assets by paying rent to the owner of assets (Bhowmik and Saha, 2013).

Incorporated business- This type of business provides advantages over the partnership and it
also gives required funds to firm through selling of assets.
Partnership- This is considered as an external source of finance in which the business takes help
from outside business. Thus, it can be stated that partnership gives outcomes in sharing funds as
well as resources.
Bank Loan- Clariton can also take loan from bank for meeting demands of finance which are
required at the business. In this, they can generate funds through institution by carrying out some
legal formalities.
1.2Assesing the implications of different sources
It is essential for the business to select an appropriate source of finance which has direct
impact on different types of activities of business. Further, it is required to check the capabilities
of sources at various parameters which help in developing benefits and owner can take decisions
regarding development of enterprise (DRURY, 2013). There are some of the implication of the
identified sources of finance of business enterprise as mentioned below:
Criteria Venture Capital Partnership
Financial implication At Clariton, they can take
funds from venture capital
firms with an aim of meeting
the requirement of funds.
In order to carry out business
practices, the stated business
can form partnership with
other business enterprise.
Legal implication This type of sources of finance
is considered as the legalized
sources and registered at law.
This source of finance is
recognized by law and the
partnership formed by people
and they also get relief from
the side of government and
both of the entities are
registered at law (Fassin,
2012).
Control The business is required to All the partners have equal

control the different process
which includes formulation of
strategies along with decision
making.
rights and plays important role
in taking decisions of the
company.
1.3Evauating the most appropriate sources of finance in business
There are some of advantages and disadvantages of appropriate sources of finance for
Clariton Antique Limited are mentioned below:
Partnership
Advantages
Financial support- There are different financial resources which are used by the business for
enhancing the level of business and they are able to make improvement in the business
performance.
Flexibility- With the help of partnership, there are few restrictions with respect to laws and the
partners are flexible at the time of managing their work in business.
Disadvantage
Interest- The amount of profit which is generated by business will be shared among all of the
parties in an equal ratio and if there is no partnership deed then the legal authority will interfere
in the business.
Taxation- This is considered as another limitation of partnership in which all partners are
required to pay taxes which is same as the sole traders (Götze, Northcott and Schuster, 2015).
Venture Capital
Advantages
Additional sources-It is essential for developing business and in some of the areas where venture
capital provides support such as taxes and personnel matters.
Connections-It is beneficial for business as the venture capitalists are more involved in various
types of activities in the business.

Disadvantages
Decision-making- The business enterprise are not able to take appropriate decisions as there are
different people who are involved in the new business (Hogan, 2012).
Less control- This is another disadvantage of venture capital as there is less control on the
different types of activities. Further, there are different issues which are faced by entity while
carrying out the activities of business practices.
TASK 2
2.1Analysing the cost of two different sources of finance
Criteria Partnership Venture Capital
Dividend There is appropriate amount of
dividend is provided to the
partners who actively
participate in the daily
activities.
Venture capitalist providing
appropriate resources in the
enterprise as there is no risk in
context of paying dividend.
Interest With the help of partnership
deed it helps in identifying the
percentage of profit that is to
be shared among the partners.
The contribution of capitalist
in financial resources and
enterprise will also take part in
managing new business in
terms of stake in particular
percentage that is decided by
the both of the firms.
Tax The new business are not
bound to pay taxes and it is
considered as null that is
supported by the partners
(Hubbard and et.al., 2014).
There is appropriate support is
provided to the venture
capitalist as the burden of
taxes are not on the new
business.

2.2Importance of financial planning with respect to Clariton Antiques Limited
Financial planning can be termed as framework which gives proper approach to the
enterprise regarding funds that is needed for meeting the level of competition. Clarion Antiques
Limited are required to focus on developing plans that helps to fulfil the aims and objectives of
the business. It also creates a programmes in order to allocating certain financial resources for
the strategic planning. Significance of financial planning for the cited business that is mentioned
below:
Inadequate financing- The resources which are available at workplace are used in an optimum
manner which helps the business for the improvement in the conditions of business. With the
help of inadequate financing it can have impact on the existing business that will be improved by
with the help of certain approaches of financial planning (Hull, 2012).
Overtrading- With the help of trading all of the activities will be done in an effective manner and
it also enhances the efficiency of the existing conditions of the business. Thus, the problem of
overtrading can be resolved through appropriate decisions of financing which enhances the
performance of business.
Budgeting- In order to forecast all of the expenses along with the income of the business so that
there is requirement to prepare the budget by the management of the business. Thus, for making
improvement in the business there is comparison between the actual figures are compared with
the budget and there adjustments of the standard figures.
2.3Assesment of the information that will be required to make decisions on financing
There are certain financial implication which can affects the performance of business
with the help of assessing different criteria at the time of takeover through other entities as given
below:
Partners- The partners will be beneficial for the business which provides financial support by
making investment in the new business. Further, this business is legalized as it is registered at
law. There are different types of partners such as active and passive who supports by providing
financial resources and other additional facilities.
Venture capitalist- At Clariton, they have option of funding through venture capitalist for the
purpose of sourcing the requirement of business. By making selection of this sources of finance

as it will be taken by the owner of business after considering the expenses included in taking this
sources (Kirkos, Spathis and Manolopoulos, 2007).
Financial broker- This is considered as another option for financing at Clariton Antiques
Limited for the purpose of raining funds by 0.5 million pound in order to build the business. The
charges taken from financial brokers is 2% and the interest which is charged on taking loans
through the external help from the financial brokers. The amount of interest which is charged by
them is around 2% in 10 years. All of the expenses which are incurred with the help of this
approach is around 0.15 million pound (Noreen, Brewer and Garrison, 2011).
2.4Explain the impact on the financial statements of Clariton Antiques Limited
If there is any kind of help is taken from the venture capitalist along with financial broker
so that it will have an impact on the financial statements
Income statement \
Particulars Amount Particulars Amount
To Dividend to the
venture capitalist a/c
xxx
To Brokerage charges xxx
To interest on bank
loan
xxx
Balance sheet
Assets Amount Liabilities Amount
Bank loan xxx Cash [ (Venture
capitalist + bank loan) -
(interest +brokerage
charges)]
xxx

Equity share capital Xxx
From the above mentioned analysis as it shows that if in case of taking helps from
venture capitalist of the business unit as they are required to pay dividend to their different
investors. It will recorded in the debit side of the income statements as it is the cost of the firm.
Other than this, there is one of the main expenses that is brokerage that reduces the profit margin
of the company. Furthermore, the interest which is paid by the company is considered as the
expenses of the business. On the basis of all of the different aspect it can be stated that expenses
impact the profit of the company at a high level. Thus, Clariton will increases at the time when
venture capitalist invest their money as well as loan from bank.
TASK 3
3.1Analyse the cash budget
Cash budget refers to the framework which provides information related to the income
and expenses. It is also considered as an estimation which is made by the company which shows
the revenue that is generated by the business at a specific period of time.

Clariton Antiques Ltd
CASH BUDGET FOR SIX MONTHS ENDING
30TH JUNE 2017
Details January£ February
£
March £ April £ May £ June £ Total £
RECEIPTS
Received in the
same month
15 22.5 30 15 15 37.5 101.25
Received in one
month
120 240 360 480 240 240 1680
Received in two
month
22.5 22.5 45 67.5 90 45 292.5
Total Receipts 157.5 285 435 562.5 345 288.75 2073.75
PAYMENTS
Payment to
suppliers
807.25 137.25 119.75 437.25 227.25 219.75 948.5
Shortage/ Surplus -649.75 147.75 315.25 125.25 117.75 69 125.25
Cash at the
beginning of the
month
110 -539.75 -392 -76.75 48500 166.25 110
Cash at the end of
the month
-539.75 -392 -76.75 48500 166.25 235.25 235.25
Interpretation

From the above discussed cash budget of Clariton Antiques Limited as it shows that the
company is not on appropriate position as compared to their competitors in marketplace.
Further, it also shows that they are required to increase in the level of production as per trhe
requirement of customers.
3.2Assessing unit cost and making pricing decisions
Particular Units Cost(£) Cost per unit (£)
Variable cost
Direct material 5000 20000 4
Direct labor 5000 15000 3
Direct expenses 5000 10000 2
Total variable cost 5000 45000 9
Fixed cost
Labor 5000 25000 5
Production overhead 5000 5000 1
Aggregate fixed cost 5000 25000
Total cost 5000 70000 14
Add 12% Profit 5000 8400 1.68
Selling price £15.68
Clariton Ltd will be capable enough to sell the products at 15.68 million pound for
attracting large number of customers.
Cost plus pricing – It is most appropriate use method in business as there are different types of
costs are there such as variable as well as fixed costs which is to be considered by the business.

Absorption costing- it is also considered as an important method for pricing in which all of the
major costs are considered by the business (Palepu, Healy and Peek, 2013).
3.3Evaluating the viability of proposed by using investment appraisals techniques
There are different types of tools are included in the investment appraisals techniques
such as payback period, NPV which helps to evaluate the viability of the investment which is
made by them.
Standard aspects for the selection of project
Particulars Criteria
Payback period 3.5 years
Average rate of return (ARR) 35.00%
Net present value (NPV) £2m