Heidelberg Cement Company: Financial Resources and Decisions Report

This report provides a comprehensive analysis of financial resource management and decision-making, using Heidelberg Cement Company as a case study. It begins by exploring various sources of finance available to businesses, including share capital, venture capital, mortgages, and government loans, and assesses their implications. The report then delves into the costs associated with different financing options, emphasizing the importance of financial planning and the information needs of various stakeholders. Budgeting, unit cost calculation, and pricing strategies are examined, along with investment appraisal methodologies like Net Present Value (NPV) and discounted payback period. Finally, the report outlines the main financial statements, evaluates suitable financial forms for different businesses, and analyzes income reports, providing a holistic view of financial management principles and their practical application.

Managing financial
resources and decisions

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Sources of finance available to business.....................................................................................1
Assess the implications of the different sources..........................................................................1
Appropriate sources of finance for business................................................................................2
TASK 2............................................................................................................................................2
Analyse the costs of different sources of finance.........................................................................2
Importance of financial planning.................................................................................................2
Information needs of different decision makers..........................................................................3
Impact of finance on the financial statements.............................................................................3
TASK 3............................................................................................................................................4
Analyse budgets and make appropriate decisions.......................................................................4
Calculate unit expenses and create pricing based on the evidence provided...............................4
Using investment appraisal methodologies, determine the viability of a project........................5
TASK 4............................................................................................................................................6
Main financial statements............................................................................................................6
Using a tabular structure, evaluate suitable company's financial forms for various types of
businesses....................................................................................................................................7
Use a table structure to analyze income reports using proper proportions and analyses, both
internally and externally..............................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Managing resources are very crucial for a business as it can help in the growth and
prosperity of the firm (Chaston, 2017). In this report there is an explanation of different factors
that are very critical for a firm named Heidelberg Cement Company.
TASK 1
Sources of finance available to business
Share capital- For just about anybody corporate, the issuance of shareholding could be a
significant form of funds. The issuance of ordinary shares might help the company to grow
substantially. The firm's stocks could raise a lot of money in order to rapidly promote this firm.
Venture Capital- Private Equity is yet another approach to finance a new firm,
particularly for individuals who really are short on cash but have a good chance of growing their
company due to desire.
Mortgage- Heidelberg Cement Company can use its estate as well as other resources to
finance the purchase of facilities, machinery, and technology.
Government Loan- Heidelberg Cement Company could apply for a private loan since
several areas provide economic help to various strained businesses.
Assess the implications of the different sources
Share capital- It can be used by the company to raise funds from the public.
Venture Capital- Entrepreneurs Heidelberg Cement Company must locate anyone willing
to invest in its operations with solvents. The risk entrepreneur has the authority to seize
judgments and share profits. There is therefore the danger that the entrepreneur could compel
them to liquidate his property and authority.
Mortgage- Funding a company by having to sell a building provides the potential for the
company to obtain additional money. However, if the buyers do not have sufficient properties to
mortgage, their chances of securing a credit decrease (Danilova, 2019).
Government Loan- Government grant is better since the cost of borrowing is cheap; there
are fewer difficulties in obtaining financing, so there's no risk of decreased management and
authority.

Appropriate sources of finance for business
Heidelberg Cement Company, in my opinion, must seek a financing from a banking organization
if the company gets a line of credit, for instance, there really is no risk of diluting of management
and authority amongst creditors and consumers. As a result, Heidelberg Cement Company will
be the sole shareholder of the business distributing finance, which will incur significant
regulatory and other expenditures. However, there really are no costs when borrowing money
from a banker. As loan investments are received when taxes are given, cheese enterprises might
get revenue. Bankers won't take advantage of the business since from time to time they're
interested. This means that credit funding for start-ups such is acceptable.
TASK 2
Analyse the costs of different sources of finance
Cost of Loan- The inflation rate on a loan might result to an increase borrowed. The loan
amount on a checking account is usually between 1% and 2%. It varies depending on the
circumstances for which compensation is requested. The credit for building has been more than
1%, and in some cases considerably higher (Khan, Yang and Waheed, 2019).
Cost of share capital- Stakeholders are someone that divides the cash flow. All money
customers had invested in the enterprise is returned. In order to get back the costs to the
investors, the firm shall create massive revenues and the expense of an equity shares value.
Cost of mortgage- Borrowing costs vary depending on the length of period that cash is lent.
4.250 percent of the population is over 15 years old. 4.578 percentage point
The 20-year rate is 4.625 percent. 4.916 percentage point
The 30-year rate is 4.875 percent 5.057 percent.
Government grants- Government funding has exceptionally low inflation because they are
intended to encourage people to contribute to the development of community or to generate
private sector jobs.
Importance of financial planning
Cash flow- Money management assists in determining real money growing working
capital, determining taxes, expenditures, and putting up a sound strategy.
Capital- With the help of a sensible annual budgeting, a corporation's effective assets may
be established and managed (Moseley III, 2017).

Income- Good pre-planned earnings are quite beneficial in terms of taxation and also extra
moment operational expenditures and savings.
Finance- In a global marketplace, effective budgeting allows a firm to quickly
comprehend the industry and take the appropriate action.
Information needs of different decision makers
Since interested parties possess opposing views or opinions as a result of their data
requirements, so knowledge demands of distinct owners vary greatly and company to firm.
Shareholders, for instance, require detailed financial knowledge to make or dispose a venture.
They're also keen to learn about dividends. Prospective investors are interested in learning about
the company's global expansion as well as financial data like EPS and NAV. Employees would
like to learn regarding compensation, salary increases, job stability, and business growth. Since
of income duties, law officers require revenue data. The foremost thing is to discover the main
issues and then investigating its source so that appropriate decisions can be made in accordance
with it (Phillips and Stalter, 2020).
Impact of finance on the financial statements
The primary aim of strategic statements about a company's financial situation, performances,
and financings status which is useful to a wide range of finance information. Such claims must
be simple to comprehend, relevant, reliable, and similar. The financial status of a company is
directly related to its stated assets, debts, and ownership. The economic success of a firm is
directly related to its financials. Accounting information gives a picture of the transactions that
take place all across the company. Any enterprise for instance the selling or use of a leased shop
– contributes to the image overall. Various sorts of financing influence the economic reports in
diverse situations. For contrast, specific investments are declining on the income statement due
to some financial funding. By cutting spending and boosting equity capital, businesses can
maximise its book value. Furthermore, optional Cash flow declines due to some financial
borrowing in financial statement. As a consequence of borrowing finance, EPS can decline,
borrowing rates and stock prices decrease. Capital structure can also raise the income statement
(Post and Altman, 2017).

TASK 3
Analyse budgets and make appropriate decisions
There are a lot of types of budgets that help in analysing the deviations that are in
accordance with the standard so that reason can be evaluated. Many types of budget’s are there
and thus are mentioned below-
Master budget- It is a forecast that shareholders use to forecast all of a corporation.
Financial plan, planned financial statements, and profit and loss account are among the
additional budgeting used in a budget period. It is commonly utilised by huge corporations.
Operational Budget- All assets and liabilities to manage a company's operations are
anticipated in a capital plan. These are monitored on a regular schedule such that management
may evaluate operating and financial results.
Cash flow budget- Cash flow budgets are created to track revenue and expenses since
money shortages or excesses can wreak havoc on a company's operations (Scholes, Mustafa and
Chen, 2016).
Calculate unit expenses and create pricing based on the evidence provided
Typically, unit cost is computed by looking at how much was spend on raw resources,
personnel, and administration. Initially, the company determines however many pieces are
created, and then a set amount is established, including some profits. Manufacturing costs
assessment is a critical duty for any organisation, and this is accomplished by scanning the
marketplace and evaluating rivals' prices. Firms with excessive unit costs seem unable to remain
competitive, and businesses with lower unit costs lose money.
Suitable unit cost may be determined as the quantity wanted to pay off loans and interests
& profits necessary may be determined. Prices are decided. So that we can forecast whenever the
money and other obligation will be repaid. All expenses, like wages, expenses, are based on the
notion of revenues generated by the sale of goods and services.
For the given instance-
Total fixed cost = £2.5 x 10000 = £ 25,000
Total overheads costs = £50,000
Total cost = Total fixed cost + Total overheads costs
= £ 25,000 + £50,000

= £ 75,000
Unit costs = Total cost / Total units
= £ 75,000/ 10000
=£ 7.5 per units
Pricing strategies available to Heidelberg Cement Company are-
Penetration strategies- In order to gain the maximum customer base, Heidelberg
Cement Company could accept a minimum pricing in contrast to its competitors' cheese
producing enterprises. It might push the cost once he has gained customer base.
Skimming pricing- The Corporation could focus on high pricing and actually expand it
to capture the industry piece by piece and generate money.
Competition Pricing- Heidelberg Cement Company must take into account the costs of
many other enterprises in the marketplace when determining its pricing.
Using investment appraisal methodologies, determine the viability of a project
Net present value-
Year Discount factor Cash flow Discounted cash flow
1
0.9091
100,000
90,910.0
2
0.8264
125,000
103,300.0
3
0.7513
155,000
116,451.5
4
0.6830
200,000
136,600.0
5
0.6209
265,000
164,538.5
Total Cash Flow
(Discounted) 611,800.0
The Net Present Value of the cash inflow is £ 6, 11,800, according to the given estimate.
However, this project will set you back £200,000. As a result, according to the NPV technique,
Heidelberg Cement Company must engage in this development.
Discounted payback period-
Year Discount
factor Cash flow Discounted
cash flow
Cumulative Discounted cash
flow
1.0
0 (200,000) 200,00
0 (200,000)

1 0.9091 100,000 90,910.0 (109,090.0)
2 0.8264 125,000 103,300.0 (5,790.0)
3 0.7513 155,000 116,451.5 110,661.5
4 0.6830 200,000 136,600.0
5 0.6209 265,000 164,538.5
Discounted Payback Period = 3+ |-5790| / 116451.5 ≈ 3.05 years
TASK 4
Main financial statements
Financial position- The main concern of every firm is to keep a large economy in order to
grow without difficulty. The ability to increase output and use finance when necessary is aided
by healthy cash standing. As a consequence, financial reports play a key role in assisting firms in
recognising their socioeconomic announcements and identifying limits, allowing them to
overcome such constraints and increase their profits.
Financial performance- In particular, it aids in the monitoring of a company’s financial.
If the performance falls short, the company can concentrate on it.
Upcoming financial planning- The sensible company records enable the enterprise to
choose which changes are compulsory but which tactics are reintroduced with extra tactics.
Firms can review their common ground via accounting records and figure out how they might
rectify their defects in the previous term in order for the company to build a successful strategy
in the next term (Teffali, Matta and Chatelet, 2019).
Income statement- One of the revenue and expenses is the income statement. A report of
fiscal position that shows how a leverage ratio has changed over time. Profitability was measured
by summarising why the company generates income and spends money on both operational and
anti operations. This also displays the contribution margin for a sales transaction, usually a
financial quarterly or year.
Balance sheet- A report summarises at a precise time the resources, obligations and
ownership of a corporation. These 3 components provide consumers with a picture about what
the business is and owing and how much the owners have committed. The capital structure
should be as follows: Assets = liabilities + equities of owners. The balance sheet is named as it

levels both columns. That makes perfect sense: a firm then must take funds or receive it from
investors (equity of investors) for all its stuff (properties). Each one of the two balance sheet
sections will include a number of users that record the worth from each. Funds like currency,
equipment, and properties are on the asset section of the balance sheet, whereas income received
and long-term borrowing is on the liabilities side. Since there is no single design that properly
addresses the variances among various types of firms, the precise assets on a financial statements
will differ accordingly and sector.
Cash flow Statement- The cash intake and outflow of a corporation are summarised in a
financial statement. The cash flow statement shows how money would come from or where goes.
Using a tabular structure, evaluate suitable company's financial forms for various types of
businesses
Formats Descriptions
Beginning of the Period Statement
At First of the Term Balance sheet shows the
assets, liability, and complete reference at the
end of the month. Such assertions are produced
at a specific time.
End of the Period Statement
There have been numerous accounting reports
form that, at the conclusion of a term and
usually known the conclusion of a financial
situation era, depict the balance sheets of
resources, obligations and equities of the
company.

For a period of time Statements
A collection of reports, collectively known as a
Speaker(s) of Profits and Complete Revenue,
notice moves in financial assets except from
dealings with shareholders in their role as
proprietors. Such advertisements are usually
produced for a specific time period (Turner and
Endres, 2017).
Company's financial styles differ depending on the corporate position of the organization.
Business owner, partnerships, and limited liability are the most common types of business
structures. In such a limited company, one man is the ownership; in partnerships, more than 1
man is the owner. Personal liability businesses, on the other hand, have several shareholders and
the business is distinct from of the proprietors. The administration as well as other statutory
regulations and rules require publicly traded corporations to financial reporting. Financial reports
for publicly traded firms must be prepared in accordance with the International Accounting
Standards IASs and other such relevant legislation and standards for the country or region in
which the business operates. However, the policies and guidelines do not require the construction
and publishing of financial reports in the event of a partnerships or limited to single company. In
the trade account of a sole proprietorship or partnership, there really is no data about dividends
(Worth, 2020).
Use a table structure to analyze income reports using proper proportions and analyses, both
internally and externally
RATIO YEAR 1 YEAR 2 Interpretations
Profitability Ratio
Profit Margin=
Net profit x 100%
Sales
3% 5% The margin has increased and thus it can be
said that the company is performing well in the
market.

Operating Margin =
(PBIT x 100%)
Sales
8% 4% This margin reduced and thus it can be said that
the firm is not doing well in the market.
Return on assets or
return on investment =
Net profit x 100%
Total assets (gross)
5.06% 1.60% It can be said from this that return of the
company’s assets is not good in the
marketplace.
Return on equity =
Net profit x
100%
Total equity (i.e. net
asset)
5.04% 7.81% Equity is giving a good return for the company
in the industry.
Liquidity Ratio
Current ratio =
Current asset
Current liability
2 0.50 It elaborates that the company is not placed
well in the short term pay off capability.
Efficiency Ratio
Account Receivable
Days=
Receivables x 365
Sales
30 Days 35 Days This ratio pretends that the firm is going to a
valuable company.
CONCLUSION
It can be concluded that there are many aspects that are explained above and thus has to be
examined in a precise manner so that it can add value to the company in the long run.

REFERENCES
Books and journals
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Worth, M.J., 2020. Nonprofit management: Principles and practice. CQ Press.