Financial Resources and Decision Making for Morrison PLC

This report provides a comprehensive analysis of financial resource management within the context of Morrison PLC, a UK-based grocery and food provider. The report begins by exploring various sources of finance, including loans, retained earnings, and venture capital, along with their implications. It then delves into the costs associated with different financial sources and emphasizes the significance of financial planning for effective business operations. The report also examines the information required for a robust decision-making system and assesses the impact of finance on financial statements, including profit and loss accounts, balance sheets, and cash flow statements. Furthermore, the report discusses budgeting and its role in making appropriate financial decisions, including cost analysis and price determination. The report concludes with an examination of financial statements, comparing different formats and utilizing ratio analysis to evaluate the financial health of the company. Overall, the report aims to provide students with a thorough understanding of financial resource management and its impact on business performance, emphasizing the importance of strategic financial planning and decision-making.

MANAGING FINANCIAL
RESOURCES AND
DECISION

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Sources of finance.................................................................................................................3
1.2 Implications of different sources...........................................................................................4
1.3 Appropriate sources finance for business project.................................................................4
TASK 2............................................................................................................................................5
2.1 Cost of different sources of finance......................................................................................5
2.2 Significance of financial planning........................................................................................5
2.3 Information required for decision making system................................................................6
TASK 3............................................................................................................................................6
3.1 Impact of finance on financial statements.............................................................................6
3.2 Budget and making appropriate decisions............................................................................8
3.3 Calculation of unit costs and price determination process....................................................9
TASK 4..........................................................................................................................................12
4.1 Financial statements............................................................................................................12
4.2 Comparison of different formats of financial statements....................................................13
4.3 Financial statements using ratio analysis components........................................................13
CONCLUSION..............................................................................................................................17
REFERENCE.................................................................................................................................18
INTRODUCTION...........................................................................................................................1

INTRODUCTION
Financial sources are managed through using different tools as analysing actual business
performance and preparing strategies for profitability at high level. In this regard, different ideas
are created for balancing between incurred expenses and gained revenue. The present report is
based on understanding different financial sources and outcomes for enhancing profit earning
capacity of Morrison entity. It is grocery and food items provider of UK that is planning to
improve its quality services effectively. In addition to this, various financial statements which are
analysed for presenting economic structure of entity is to be described. Moreover, cost of
different sources of finance for funding can be expressed through this assignment. Along with
this, several information systems for decision making system are to be presented. Apart from
this, significance of financial planning including budget for decision making system can be
identified. Hence, students are able to understand different financial sources for effective
management of business organization through this report.
TASK 1
1.1 Sources of finance
Morrison entity can allocate fund from different sources such as taking loan from
financial institution, retained earning, getting use of personal savings and so on. By analysing
financial statements as income statement, balance sheet, profit and loss account, varieties of
ideas are generated for economic stability and improving monetary profile of organization. Some
of the main sources can be expressed as follows:- Taking financial aid from family members and friends: - It is great source of finance for
enlargement of entity as well creating innovations in quality services (Abanis and et.al.,
2013). Therefore, using personal saving and reserve cash at entity is best tool for
implementing financial decision making process. Venture capitalist:- Morrison entity can allocate fund from venture capitalist by which
effective amount can be gained through this process. Moreover, for financial sourcing,
various tools and techniques for management of entire business activities can be achieved
at high level.
 Taking loan from bank:- For improving performance of entity by creating innovations in
quality services of Morrison can be done through taking loan from financial institution

like bank. However, adequate and required high level of fund can allocate through this
source efficiently.
Thus, collecting fund from mentioned internal and external sources are effective for enhancing
efficiencies of Morrison as well making decisions for further operations. In addition to this, for
getting source of finance from different ways is effective for effective profitability and
increasing efficiencies of entity at high level. Moreover, internal and external source of finance
are valuable for enhancing profitability as well creating innovations for further business
operations effectively. Hence, effectiveness of organization can be achieved through getting
source of finance from different tools (Berman, 2015).
1.2 Implications of different sources
Financial sources Financial
implications
Legal implications Dilution of control
Personal saving Lack of fund can occur
for future operations
No legal implication Using personal saving
remains risky for
business operations in
future time in case of
requirement.
Retained earning Using reserved fund of
organisation is risky
for further operations.
Less formalities Same as for personal
saving
Venture capitalist High interest rates for
refund affects future
profitability and future
business operations.
It has some legal
implications for
operating business
activities.
Monetary position of
entity impacts for
future operations.
Loan from bank Same as for venture
capitalist.
Lots of legal
formalities.
Same as for venture
capitalist.

1.3 Appropriate sources finance for business project
Services provided by Morrison can be improved through choosing appropriate financial
source for creating innovations. For this purpose, high level of fund can be gained through
granting loan from financial institution. However, funding through venture capital is useful for
improving quality services of organisation effectively (Bodnar and et.al., 2013). In accordance to
this, selecting best source for getting financial source is great tool for making decision in
prospective of future operations. However, it can be accomplished through using effective
financial sources. In this process, high level of amount can arrange for expansion of entity and
enhancing its quality services through venture capitalist and granting loan from bank. Thus,
banks and retained earning are best tool for financial management as well improving its
efficiencies. Therefore, by taking advantage of loan from bank is suitable to allocate adequate
fund for project accomplishment effectively.
TASK 2
2.1 Cost of different sources of finance
Above mentioned financial sources are adequate for improving services of Morrison
entity. For this purpose, it is required to analyse all cost incurred on all operations.
 For using personal saving and retained earning, it is essential to analyse all fcators
including performance of entity in future time. It is determined that Morrison has not so
adequate fund to use for business operations therefore reserved least fund should be
secured.
 For granting loan from bank, it is essential to identify interest charged on fund as well in
regards to venture capitalist, refund amount and all cost incurred for operations are
determined. Including this, cost of different sources of finance including dividend,
interest rates, commission and all factors are required to be analysed.
 For getting source from retained earning, it is required to consider future saving and
considerations for further operations. However, all factors regarding cost of finance are
essential to be analysed that affects further operations and implementations.
Thus, as per evaluation, it is recognized that Morrison can get source through loan from bank
and venture capitalist as financial aid from other business entities. Hence, adequate and high
level of fund can allocate through these sources that influence profitability and further operations
regarding improving quality services of entity.

2.2 Significance of financial planning
Manager of finance department prepares plan on the basis of analysing actual business
performance. It is important to achieve effectiveness of Morrison as well improving its quality
services at high level. Through financial planning, systematic steps are presented to be followed
on that affects on further business operations. In addition to this, financial planning is created
including forecasting and decision making to operate business activities (Buckland and et.al.,
2016). It is helpful for increasing business and competitive strategies at large scale. In this
process, significance of financial planning can be described as below:-
 Useful for effectiveness of organization
 Increases profit earning capacities as well competitive advantage.
 Useful for adequate production and distribution system
 Valuable for making decisions regarding further business operations.
 Crucial to implement financial position and improving economic structure
Therefore, through financial planning procedure, several ideas are created for decision
making and enhancing efficiencies of Morrison plc. In addition to this, financial planning
procedure is helpful to present systematic business operations as well creating innovations for
expansion of business entity. However, financial planning is considered as basis for making
decisions related to transaction of goods and enhancing its efficiencies at large scale.
2.3 Information required for decision making system
For decision making regarding improving performance of Morrison through enhancing its
quality services, different information are required. Therefore, information related to financial
and non-economic position of entity. Through this process, potential of organisation for profit
earning and further operations are identified.
 Information related to entity's production and distribution of goods are gained that are
interlinked with further operations. However, various operations are recognized including
profitability, liquidity and efficiency of firm therefore implementations in future time can
be obtained effectively.

 In this regard, all business operations with competitive strategies and sustainability power
are needed to be analysed that remains linked with product services and different
operations for future time period.
However, actual performance of Morrison is analysed through this process that proceed to make
decisions for further implementation and decision making. Including this, all information of
business organisation are collected as well analysed for decision-making and implementing
strategies in future time period (Carbó‐Valverde, Rodríguez‐Fernández and Udell, 2016). Thus,
all of the information evolving profitability, liquidity, efficiency of entity are required to collect
and analysed for decision making system related with improving product services provided by
entity.
TASK 3
3.1 Impact of finance on financial statements
Finance is provision of money that is useful for getting sources and investing fund for
business operations. In this process, finance plays crucial role to present business performance
and enhancing profitability of firm at high level. However, through financing and transacting
money for production and distribution system as well different business operations get impacted
through this process. In addition to this, transaction of goods and services impacts on economic
position of Morrison that presents monetary position of entity (Dudin and et.al., 2014).
Moreover, funding is related to obtaining sources and investing money for business performance.
In this process, economic profile of business entity is obtained by which various ideas are created
for financial development of business organization. In addition to this, prepared financial
statements are analysed thereby several tools and techniques are obtained for making decisions
related to business expansion and making decisions for effectiveness of quality services provided
by company. Besides this, different financial statements are prepared including profit and loss
account, balance sheet, income statement,cash-flow, fund flow etc. Through analysing these
components, monetary position of Morrison is analysed as well its profit earning capacity is
recognized (Morrison plc, 2016). It generates different ideas for further business operations and
improving its quality services effectively. Thus, finance impacts on financial statement as well
adequate production and supplement of goods in future time can be set by formulating strategies
in a systematic manner.

In addition to this, fund which goes and incurred for business operations entered into
expenses list as credited in financial statement. However, gained revenue entered into debit side
of the financial statement that shows economic position of entity. Likewise,in context of assets
and liabilities, all gained and incurred cost for exchanges are presented in financial statements of
the organisation. Including this, it is considered that an organization who has effective financial
performance interrelated with different components and enhancing profitability ratio of
organization. Under this system, finance plays significant role for financial planning and making
decisions for operating further business operations at high level (Hall and et.al., 2016).
Moreover, financial statements are prepared and recorded on the basis of transaction of goods for
production and distribution system. Including this, incurred expenditures and gained revenue. On
behalf of these financial statement analysis, several ideas are generated for forecasting and
decision making related to business operations.
3.2 Budget and making appropriate decisions
Budget is one of the best tool for financial management and effective funding for
business operations. It is termed as forecasting and decision making component for preparing
strategies regarding enhancing efficiencies and effectiveness of business organization. In this
process, manager of Morrison analyses all business operations including performance. On the
basis of which, systematic planning procedure is created for implementation as well enhancing
quality services at high level (Finkler and et.al., 2016). Moreover, appropriate and specific
decisions are created for expansion of entity and improving its quality services that is related
with decision making tools. However, appropriate decisions are made for operating business
activities efficiently that includes several tools of business organization's productivity and
profitability. Along with this, strategic and risk management is also done through this system that
is effective for reducing risks and implementing action plans for organization's effectiveness.
Therefore, budget is appropriate for resources and fund allocation. It is interlinked with decision
making process and forecasting for future development. However, preparing budget is
interrelated with production and distribution system of goods and services. It is time consuming
and beneficial for management of overall business operations. Apart from this, there are several
kinds of budgets prepared such as sales, purchase, performance and so on. Thus, a specific
implementation and quality services of Morrison in particular filed is get improved. In this

process, budget is decision making process for implementation of organization and enhancing
quality services of organization at high level (Jiang, Zhu and Huang, 2013).
In this regard, budget for next 6 months for the organization is presented as below:-
Interpretation:- As per above mentioned table, estimated investment for 1st month
January is 15000 that's return forecast as negative. However, for further months, amount of
investments are different that estimated to gain different results. As here, investments for January
to June are estimated as 15000, 22500, 30000, 15000, 15000 and 3750 that are estimated to gain
various outcomes. In this regard, it is estimated that in starting 3 months, organization may get
loss for investments that would affect the entity's effectiveness. It is due to risk in innovations,
mismanagement and issues for uncertain changes occur at workplace. However, it is forecast that
after three months, organization will be balanced in production and distribution of goods that
will impact on its financial position. Further, for next three months, it is estimated that
organization will achieve proper refund on investment for technological implementations and
financial performance of entity will be enhanced effectively.

3.3 Calculation of unit costs and price determination process
Cost for production and distribution system is determined through costing methods such
as marginal, demand based and competition based theories. Therefore, manager of Morrison
evaluates costs for price determination as well preparing financial statement as income statement
for balancing between incurred expenditures and gained revenue. However, unit cost is measured
through dividing total cost to number of units. Therefore, unit cost is calculated for decision
making process related to production and supplement of goods and services (Menyah, Nazlioglu
and Wolde-Rufael, 2014). In this process, price determination is done through costing methods
and preparing planning procedure for further business operations that is interlinked with
productivity and profitability at high level. Under this system, various unit costs are determined
including material and labour costs. On the basis of which, various tools and techniques are
obtained for decision making process and cost effectiveness. Including this, unit cost calculation
and determining prices are effective for further business operations. In accordance to this, price
determination process is interlinked with planning procedure including decision making for
implementation and improving product services at large scale. However, effective balance
between incurred expenditures and eared revenue is created that is suitable for pricing and
making decisions regarding business operations. In this regard, unit costs for production of
products and services produced by Morrison is evaluated as below:-

Interpretation:- In this way, net selling market is estimated for investment to improve
economic position of Morrison. It is gained that entity will incurred 200 on purchase per unit as
well additional as on freight, this expenditure will be 10. Therefore, total cost to be incurred will
be 210. In this way, it is estimated that profit margin on this expenses will be gained as 30%
therefore, net selling on this investment can be achieved as 273 that is quite effective and
valuable for the organization. Thus, it can be suggested that entity should invest on further
business operations so proper refund can be achieved positively.
Capital budgeting and investment appraisal techniques for best project regarding
improving services of Morrison plc:-
NPV:- Through this technique, net present value of two projects is compared that
indicates actual performance and selecting best project for further investment. In this regard,
following NPV is evaluated as:-
Interpretation:- There are two projects whose initial investments are estimated as 8.6 and
4.4. However, cash outflows for next 6 months are different from each other. Likewise, present
value is evaluated at 14% rate. Thus, applying formula for calculating PV as [1+1/(1+R)^n].
Further, by evaluating PV, it is deducted with initial investment that presents net present value.
As per this NPV of 1st project is higher than 2nd so it will be chosen for the project. Hence,
adequate return can be gained by selecting 1st project.

IRR:- It is investment appraisal technique that is helpful to choosing best project by
ranking on it. In this way, IRR for two projects can be calculated as:-
Interpretation:- Rank on 1st investment is 3.22 while for the 2nd it is 3.08. Thus, selecting
project 2nd would be appropriate according to this investment appraisal technique.
ARR:-
Through this appraisal techniques, average on investment is estimated. In this project,
average rate on return for 1st project is 35.81% while for 2nd project, it is 43.56%. Therefore, it
will be more appropriate for proper refund and improving its profitability efficiently.