Detailed Report: Managing Financial Resources for Business Success

This report delves into the critical aspects of managing financial resources within a business context. It begins by identifying and evaluating various sources of finance, categorizing them into internal and external options, and assessing their respective advantages and disadvantages. The report then explores the importance of financial planning, emphasizing its role in allocating funds effectively and ensuring optimal returns on investment. Furthermore, it analyzes the significance of financial statements, differentiating between internal and external users and explaining how different financial transactions impact these statements. The report also includes a cash flow analysis, providing a practical illustration of financial management principles. Overall, the report offers a comprehensive overview of financial resource management, equipping readers with a solid understanding of key concepts and strategies for business success.

MANAGING FINANCIAL
RESOURCES

Table of Contents
INTRODUTION..............................................................................................................................3
TASK 1............................................................................................................................................3
1.1................................................................................................................................................3
1.2................................................................................................................................................4
1.3 ...............................................................................................................................................4
2.1................................................................................................................................................5
2.2................................................................................................................................................5
2.3................................................................................................................................................6
2.4................................................................................................................................................7
3.1................................................................................................................................................8
3.2................................................................................................................................................8
3.3................................................................................................................................................9
Task 2.............................................................................................................................................10
4.1..............................................................................................................................................10
4.2..............................................................................................................................................10
4.3..............................................................................................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES .............................................................................................................................15

INTRODUTION
There is need to have effective management of the financial resources in order to attain the long
term objectives in the firm. Nowadays, there are so many tools which have been opted by the
professional accountants in the firm in order to optimum utilise of resources. To start any
business, there is a need to know about the funding requirements so that they could effectively
take initiatives to start the firm (Topa and Herrador-Alcaide, 2016). Now, this has been
concerned that the entrepreneur has to know all about the market where he or she is going to set
up his start up. For starting a business, there is a need to have the environmental scanning on
their part so that the market condition can be ascertained. This has been a greater concern for the
entrepreneur before going to start any firm.
TASK 1
1.1
For every business there are variety of sources which are available from where finance
can be raised. These sources can be better understood in different heads as following:
 Personal saving- it is the most famous and easy source of finance available with the
entrepreneur. He can use his personal savings for meeting the future needs of business.
 Sales of extra assets- in the premises of business there are various such assets which has
no use or not being used even once. Finance can be raised by selling those assets in the
market.
External sources
 Loan from bank- Banks are also an important and all time available source of finance
for the enterpriser (Shortall and et.al., 2016). Loan can be taken for both long and short
term needs of the business. Although taking bank loan is not easy as it is provided after
checking the repaying capacity of the business. Therefore creative restaurant can raise
loan from banks by providing them its business plan.
 Leasing- in this the fixed assets can be taken on lease and payment can be done in future.
The cited company can take the land and fixed assets on lease from the outsider.

 Government grant- these days government is providing different grants to food business
in order to promote tourism and economy. Therefore by presenting an effective business
plan to government the management of the cited restaurant can raise finance.
1.2  Internal source of finance- Personal savings- While saving the money as it is entrepreneur suffers the loss of earning
interest. Personal savings can be invested in different areas and returns can be enjoyed in
the long run.
 Sales of assets- there are many assets which need to be registered before they are sold in
the market. This add the total registry cost and other expenses also occur at the time of
sale like transferring cost of the product from owner to buyer.
External sources Bank loan- Banks charge high interest rates against the loan they provide. Applying for
loan is a very complex process (Schroeder, Clark and Cathey, 2016). It includes
preparation of many documents. With this bank loan is provided to a limited amount only
and with this they also also enjoy the priority of getting payments at the time of
insolvency along with the calculated interest. Leasing- person providing the lease has the right to take back the leased product if
company is declared insolvent. Rent of these products and services is comparatively high
and even than these properties can not be used completely in a way which the
entrepreneur wants to use it. It is limited in nature too.
 Government grants- the political bodies charge high interest rates to the business.
Supported with it, an individual is bound to use the taken amount in exactly the same
manner it was written in the contract.
1.3
Before selecting the financial source for the business it is very important to evaluate each so
that the best source can be selected. Creative restaurant can use the following sources of finance
to meet the need of finance:
 Bank loans- When the enterpriser use this source of finance he is benefited as it offers
tax benefit to him. As repayment can be done in instalments it reduces the total pressure
of repaying a big amount for the management (Robson, Young and Power, 2017).

 Government Grants- It can also be used as an effective source of finance. Funds can be
raised easily by providing the government business plans and other required information.
Also the interest rate of loans provided by government are comparatively low which
reduce the repayment amount. The only problem with this source is that it require much
documentation for applying.
2.1
Sources of finance Cost
Banks Banks provides loans at specified rate of
interest. This can be used as a long term as well
as shorterm source of finance for the company
to fund its financial requirement and after a
specific period of time company has to pay
back the loan with an interest rate which is
being decided at the time of lending the loan.
Subsidies by goverment Government provides subsidies to various
business operations which may be in terms of
cash and kind this is a support of government to
the business to fund its operations to regulate
the action (Verbano and et.al., 2016). There are
several policy on which money can be taken at
very low rates of interest.
Insurance companies Insurance company also provides various funds
to the companies if they have met any loss by
natural disasters. This also supports business to
fund its operations to do business.
2.2
Planning is initiates forecasting and bridges the gap between what we are and what we
wanted to be. Financial planning is very essential for a business entity in accordance with
investing the finances in a proper manner. The aim of every company is to earn maximum return
which is done through proper allocation of fund which requires assessment of all the elements
and according to that driving a conclusion for that which is financial planning (Picker and et.al.,
2016). A company acquire its finances from different sources like- stake-holder's, financial
institutions etc. so different parties interest is associated with the business so it has to invest its
funds properly. The investment of the funds properly requires a planning to design a plan and
ascertain a budget for each and every department in the business so as to maintain the funds.

Sometimes the company lacks in fund so it has to utilise the available resources in the best way
which also requires a proper planning to ascertain the cost which will occur in different
department of the company and accordingly the money is divided among these different
departments. Financial planning is essential to ascertain the cost and helps in preparation of a
standard budget according to which a company needs to divide its finance in different parts. The
investment of fund properly only gives back the best results to the company so it is necessary to
plan the fund division in different sources which gives out best returns.
2.3
Every person wants to know the performance of the business where he is directly or
indirectly concerned to the firm. There are basically two types of information transmitted;
internal information and the other is external information. The internal information is needed to
the business where they could make their decisions on their part. The top level authorities
managers, auditors, accountants and any other individuals who are mainly connected to the
company. While external information is required to the individuals who invested or propose to
invest their capital to the business. The kinds of information is needed to the various individuals
are being evaluated hereunder:
Internal decision makers: Top level authority: the company's top level authority of the firm are required to have
the financial statements, cash flow statements of the firm in order to have the effective
management decisions for making an efficient budget for the firm. Reviewing of own
performance over the period and in against to the rivals (Malik, Field, and Gorwood,
2016). Thus, by assessing financial statements, firm can create appropriate system for the
future.
 Employees: To survey organization's gainfulness and its effect on pay structure and also
arrange salary articulation is assessed by the members of creative restaurants.
External decision makers: Investors: These are the individuals who keep invested their money into the business
after analysing the the financial statements of the firm. The financial information is
needed by the investors to know about the firm's liquidity, efficiency and performance of
the firm.

 Banks and other financial institutions: These are the bodies which wholly gives
finances to the firm in order to meet the selected criteria of the firm. This is must for
surveying organization's capacity in connection to give loans and other financial supports
to the firm. These institutions needed all the statements which are related to the finance. Suppliers: These are the person who supply goods on credits. But before going to supply
the goods, they would know about the company's viability via assessing the financial
statements.
 Government: this the body which needs the financial statements of the firm for
evaluating the tax liability.
External users are communicated accounting information in the form of financial
statements. The main purpose of statements are cater for the needs of such users of accounting
information in order to make appropriate decision making.
2.4
There are numerous things, for example, sales, collection of cash, proprietor's capital
equity, raising of shares, payment of dividend, buying of treasury, costs, borrowings, and so
forth affect the financial statements. When the organization executes, every item would influence
financial statement. The first financial transaction ought to be said is sales. At the point when
sales are made, it builds income in Income statement and, associate cost of products sold, it
influence on the net profits.
On the balance sheet, sales make the marketed goods decrease and increment money
gathered or a record receivable. In this way, making good sales would bring about great effect on
the business, proprietor's value and the performance of a company. Secondly, the organization
tries to gather cash from clients and so on (Ho and Peng, 2016). It is accumulation of cash.
At the point when the organization gathers cash, it decrease account receivables and
enhance cash. It is on the grounds that the organization collect money from their borrowers and
in this way, these thing is changed over into trade out the period paying bill, perhaps from 30 to
60 days. Along these lines, gathering of money will raise the capital of the organization to
guarantee the financial position of the company.
The following money activity is issuing of shares. At the point when the organization
issues new shares, it will expand premium since they are required to spend more money through
cash to issue new offers to open and furthermore, the organization will pay more dividend to

shareholders following a year so it will influence profit on income and loss statement. Then
again, issuing new offers will create capital on balance sheet on the grounds that when financial
specialists purchase its offers, they will build the capital of the company. After a year, the
organization must pay profit every year to their shareholders. The activity will make held profits
for the year diminishes on the income statement.
3.1
Particulars July August September October November December
Cash inflow
Opening cash balance 24000 38745 63881 94576.8 135188 1874
Sales revenue 32000 39360 48412.8 59547.744
73243.7251
2
90089.78
9
Other income 12000 5625 4155 3625 8632 65
Total cash inflow 68000 83730 116448.8 157749.544
217063.725
12
284057.7
89
Cash outflow
Administration expenses 5000 5585 4656 2513 2546 65
Salaries of personnel 8924 5451 9526 9256 12552 98
Promotional expenses 6547 2141 2162 3616 5641 35
Electricity 2532 2651 3212 3625 4625 24
Maintenance and other expenses 6252 4021 2316 3552 4252 25
Total cash outflow 29255 19849 21872 22562 29616 249
Closing cash balance 38745 63881 94576.8 135187.544
187447.725
12
259070.7
89

The above portrayed budget involves that closing cash balance of the organisation
expanded from £38745 to £259070.7. Subsequently, sales income of firm likewise expanded in
every month at a same growth level I.e.23%. In addition, from November to December because
of Christmas season Creative restaurant achieved accomplishment in drawing in more clients.
Alongside this, add up to money outpouring likewise expanded from £15300 to £16472
separately. Hence, by considering the general performance it can be expressed that financial
position of the cited restaurant is sound.
3.2
Particulars Amount (in £)
Cosmetic products 6000
Electricity and other expenses 4000
Promotional expenses 6525
Salaries 9852
Miscellaneous expenses 6125
Depreciation on equipments 2500
Maintenance expenses 3594
Total cost 38596
Average number of customers served 115
Cost per customer
Total cost / number of
customers served 335.6173913043
Gross margin 28.00%
Price per customer
Cost + (cost * gross margin
%) 429.5902608696
3.3
PROJECT.A
Year Cash inflow PV factor @ 9% Discounted cash inflow
0 -120000 -120000
1 50000 0.9174311927 45871.5596330275

2 58000 0.8416799933 48817.4396094605
3 55500 0.7721834801 42856.1831433891
4 67000 0.7084252111 47464.4891413682
5 80000 0.6499313863 51994.5109038676
NPV 117004.182431113
IRR 36.27%
PROJECT.B
Year Cash inflow PV factor @ 8% Discounted cash inflow
0 183500 -183500
1 60000 0.9259259259 55555.5555555555
2 64000 0.8573388203 54869.6844993141
3 71230 0.793832241 56544.6705278667
4 23820 0.7350298528 17508.4110936115
5 92100 0.680583197 62681.7124468086
NPV 63660.0341231565
IRR 17.45%
By computing the above mentioned answers, this has been found that the the project A and
project B both are having positive net present value. But the project A is having the higher NPV
as compared to the project B. SO if there is need to opt one project then there is only have to opt
project A. because, it has 117004 Net present value. Which is more than to project B.
Task 2
4.1
In Creative restaurant the following financial statements are produced: Income statement- It is prepared at the end of accounting year as it helps in calculating
the total income earned after making various expenses in a particular year. Both the gross
and net profit can be calculated with the help of this statement (Herbener and Rapp,

2016). It also helps in making comparison possible as the income of different years can
be compared with each other. This helps in identifying the factors leading to the change
in business output. This way the reasons for deviations can be corrected on time so that
their risk can be minimised in future. Cash flow statement- It gives the total of cash inflow and outflow in a particular time
period. It includes all the cash transactions that took place in the business therefore the
management of Creative restaurant can get the clear vision of which area of the business
is demanding maximum cost and from where all the funds for business are raised
(Financial planning. 2017). It helps in identifying the areas which need to be controlled
by management.
 Balance sheet- It is an important financial statement for the sited business. It gives the
knowledge of all the available assets with the business and liabilities against them. It
helps in estimating the current financial condition of the cited restaurant and therefore
decision regarding future investments can be done with the help of this statement.
Purpose of financial statements:
Balance sheet helps in giving the exact idea about current state of a particular business
entity which further help management in taking future decisions for the organisation. It can be
used by creditors and other investors to make their choice of investing in company after
analysing its financial position.
Income statement
It is also termed as profit and loss account. It gives the balance amount of profit earned in
a particular accounting year which helps management in comparing the efficiency of its
operations of two distinct time period. Creditors use this account to take their decisions regarding
giving credits to the same organisation as it gets affected with change in profit rate.
4.2
Basis of difference Properioter Companies
Meaning Properioter is the one who
have the sole discretionary
power of taking decisions.
Publicly listed organisations
makes decisions by following
the guidelines revealed by the
government.

Financial statements Profitability statement Income and cash flow
statement, balance sheet,
statement of changes in
equity and supporting notes
are prepared by the firm.
Auditing and publishing
requirements
No Yes
Rule and regulation
requirements
No UK GAAP, IFRS
Sole proprietorship and company – Financial statements of this type of organisation
shows current position of company at a particular time. It shows the number of assets hold by it
and liabilities to be paid. It also give name of that business unit with date in a horizontal or
vertical format. It gives the conclusion of owners equity.
Comparison between formats of main financial statements
Company Sole proprietorship
In this more than one account of capital is
made depending upon number of partner and
shareholders
It contains single capital history
Revenue earned in a particular accounting
period is divided into different shareholders
capital account depending upon their ratio of
sharing.
Profit is distributed in a singe persons account
Income statement gives results of profit
distribution
It is not done in case of sole proprietorship
4.3
Income
Statement 2015 2016
Fiscal Year
Ends 14/03/15 12/03/16
Turnover 23775 23506

EBITDA 1324 1267
EBIT 745 683
Operating
Profit 81 707
Pre-tax
Profit -72 548
Profit After
Tax -166 471
Profit For
Financial
Year -166 471
Retained
Profit -496 237
Normalized
EPS p 24.26 21.88
Balance
Sheet
Total Assets 16537 16973
Total
Liabilities 10998 10608
Total
Equity 5539 6365
Cash Flow
Cash Flow
Per Share 51.91 23.32
CAPEX PS 51.75 29.73
Dividends
DPS p 17.3 12.2
DPS
Growth% 2.37 -29.48

Dividend
Yield (%)
%
Investment Ratios
2015 2016
Net
Tangible
Asset Value
Per Share 271.14 302.2
ROCE 7.87 7.1
ROE 7.49 6.42
Net
Gearing 26.74 19.95
Gross
Gearing 49.94 37.91
Cash 23.2 17.96
Interest
Cover x 5.17 5.21
Quick Ratio
r 0.51 0.52
Current
Ratio r 0.65 0.66
Above mentioned table shows the 2015 and 2016 investment ratios which have been
made on the basis of financial statement of Sainsbury plc. The return on capital employed
in 2015 was 7.87 which decreased in 2016 and come to 7.1. which shows the inefficiency
of the operations. The return on equity is also decreased form 7.49 in 2015 to 6.42 in
2016. which reflects the operations are not carried out in a most proficient manner. The

current ratio of 2015 is 0.65 which increased to 0.66 which reflects the good sign(DaDalt
and Coughlin, 2016).
CONCLUSION
From the above reports and calculations, it has been found that there is strong need of
managing financial resources in an effective manner so that the objectives of the firm could
achieve in a most efficient manner. This also have been found that the finance is the strongly
needed for the firm. And this could achieve by way of various manner which have been
described earlier. The financial experts are the only who manages finance in a strong manner.