Analysis of Financial Resource Management for Metro Products Ltd

This report provides a comprehensive analysis of financial resource management, focusing on Metro Products Ltd. It begins by differentiating between the legal requirements of limited and non-limited companies, followed by an explanation of the differences between management and financial accounting. The report then delves into the importance of cash flow statements, profit and loss accounts, retained earnings, and balance sheets for the company. Furthermore, it identifies and analyzes the various stakeholders of Metro Products Ltd, examining their interests, influence, and the options available to the company in managing their interests. The report concludes with a summary of the key findings and their implications for effective financial resource management within the organization.

MANAGING FINANCIAL
RESOURCES
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TABLE OF CONTENTS
Introduction..........................................................................................................................................3
TASK 1.................................................................................................................................................3
1.1....................................................................................................................................................3
A) Explain the difference between the legal requirements between a limited company and a non-
limited company and state the requirements for Metro Products for the end of the financial year.3
B) Analyse the difference between management accounts and financial accounts........................4
1.2 Explain the Cash flow, Profit and Loss account, Retained Earnings account and the Balance
sheet and state the importance for Metro Products Ltd...................................................................5
1.3....................................................................................................................................................6
A) Identify the Metro Products Ltd’s various potential stakeholders..............................................6
B) Analyse their relative interests, influence and options available to Metro Products Ltd in
managing the interest of the stakeholders........................................................................................7
Conclusion............................................................................................................................................8
References............................................................................................................................................9
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INTRODUCTION
Finance is act like a magic wand to change the condition of an entity from poor to the rich
status of the business. Metro products Ltd has been selected for the project report in order to
ascertain the importance of financial resources and their overall management for the firm like Metro
Products Ltd. This project is all about defining legal business requirements of limited and private
company with the difference between management accounting and financial accounting.
TASK 1
1.1
A) Explain the difference between the legal requirements between a limited company and a non-
limited company and state the requirements for Metro Products for the end of the financial year
Legal definition- The nature of business of private company is described in the laws and
legislations which states that a company which is not public company are regarded as private
company. The public company on other hand refers to an entity owned by owner with some share of
government ho regulate the performance of the business. The suffix added after the name of the
business reflects the overall status of limited or non limited company. The violation of the rules of
limited company the suffix will be removed after the name of the business.
Listing requirements- the additional burden imposed on a limited company is to list their company
in the recognised stock exchange of United Kingdom. The limited company is able to meet all the
legal requirements of listing their business in the stock exchange (Ehrhardt and Brigham, 2016).
The benefit of listing their firm into the recognised stock exchange of UK that is London stock
exchange is to get adequate capital fund to accomplish all their requirements of the business. UK
entities use the phrase Public limited companies whose acronym is PLC in order to convey
investors about their business status to invest in the business. On the other hand, private entity is
obligatory in order to list their business in the recognised stock exchange. There is no burden on
private entity to list as they can list in the stock exchange according to choice in order to add
volatility in their business.
Authorised share capital for companies- The paid up capital in order to start the business as a
public company is mentioned in the act which needs to be followed by an entity. The violation of
this principle will restrict n entity to be called as pubic limited as they will not grant all the rights
and duties enjoyed by limited company. The minimum paid up capital decided by UK authority for
public companies is £50,000. There is no kind of obligation for private company for accomplishing
the minimum authorised capital requirements in order to start their business.
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Share allotment restrictions- The public company are restricted in allotment of shares unless they
meet all the requirements of the business (Hira, 2016). The legal requirements of share allotment
states that an entity owner cannot allot shares to its shareholders unless minimum one quarter share
of the nominal value and overall premium has been paid up by the shareholders of the business.
Certificate of commencement of business- The business will be operated by an entity owner with
the permissions of the registrar of companies who issues certificate of commencement of business
of whatever nature the business is will be recorded in the official’s records. This is obligatory
requirement for an entity according to the provisions of company’s act 2006. This is essential as if
company has changed their status of company from public to private then this certificate is act like a
legal evidence in order to improve their overall business in the best possible manner.
B) Analyse the difference between management accounts and financial accounts
Definition- Financial accounting refers to normal accountant branch which is related with the
financial transactions recorded in the book of accounts in order to determine the financial ability of
the business enterprise (Evans and Porter, 2010). In this form of accounting, transactions are taken
into account in order to ascertain the profit or loss incurred in the business. On the other hand,
management accounting is that branch of accounting in which certain matters related to the
management are communicated to the top management to ensure higher productivity. The
information gathered by an individual will be conveyed to all the members of the firm in order to
work upon strengths of business by eliminating all the deficiency of an enterprise.
Information- The financial accounting usually communicates numerical facts and figures as they
emphasises on the quantitative information of business related to the sales or expenses incurred in
the business (Davies and Drexler, 2010). The numerical facts are conveyed to ensure overall
productivity of the business in relation to the external market goals and the objectives framed by an
enterprise. At the same time, on other side management accounting practices are operated in order
to focus on monetary as well as non-monetary information from one end to another for the
betterment of the business enterprise. The information reports to the management include
ascertainment of costs through cost sheets and their reason of increment essential for an entity
owner. The reason is important for the business to know in order to improve their overall
performance.
Business users- The users of financial accounting are internal and external business users to whom
all the financial information related to the business is communicated. The information of the
business is conveyed as non-disclosure of proper information may affect the financial status of an
entity which will in turn affect overall brand image of Metro Products ltd. On the contrary,
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management accounting practices are develop by an entity owner order to report cost sheets and
budgets which will be approved by the top management n order to execute at the workplace. The
budgets will not be passed to the next level without sanctioned by higher authority as officials of the
firm will verify the reliability and accuracy of the budgets.
Focus- In terms of focus of an entity which is determined differently according to the branch of
accounting that is financial as well as management accounting (Ehrhardt and Brigham, 2016).
Financial accounting stresses on preparing financial reports in order to communicate the owner
about the current financial status of an entity. This will be communicated to all the shareholders of
the firm in order to attract them towards the current business. These financial reports depict
historical information related to the business which is usually prepared for fixed period of time.
Management accounting stream on other side emphasises on existing financial data which is
commonly used for forecasting purpose. The future cost ill be predicted in advance in order to
reduce by making higher efforts currently in the business entity of Metro Products Ltd.
1.2 Explain the Cash flow, Profit and Loss account, Retained Earnings account and the Balance
sheet and state the importance for Metro Products Ltd
Cash flow statement- The statement of cash flow is regarded as important financial statements
used in financial accounting in order ascertain the available cash in the business. Cash is that
important component in an entity in order to maintain higher liquidity position in the business in
paying off short term obligations of an enterprise (Davies and Drexler, 2010). Current assets are
used to eliminate the existing current liabilities imposes on the business which will be reduces in a
given time frame. Cash flow statements prepared by an entiit ascertain the cash position of an entity
which will be helpful for an entity in order to know the deficits or surplus of cash available in the
firm. Excess amount of cash in Metro Products Ltd are utilised in making investments in the
business in order to improve their overall business performance.
Profit and loss accounts- The primary objective of every business is to earn higher amount of
profit in order to meet all their business responsibilities which will be determined by using income
statements (Ehrhardt and Brigham, 2016). The final net profit earned by an entity after excluding all
operating and non operating expenses from the total sales earned by the firm in a particular financial
year. T has two variants which will be mostly prepared by manufacturing business to ascertain the
amount of profit after meeting all kinds of expenses of their business. Trading and profit and loss
account will be prepared by an entity in order to determine the amount of net profit incurred by
them.
Retained earnings- The profit secretly maintained by an individual after paying dividend from the
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net profits of the corporation is regarded as retained earnings. It is legally defied sources of finance
which can be used y an entity owner in order to fund their business requirements as this source of
finance is fully utilised by the owner for their business purpose without seeking any permissions.
The positive balance of retained earnings are only utilised in paying off dividends and not from the
negative balances of retained earnings in the business. The balances of retained earning are recorded
in the shareholder’s equity of the business under the head capital of balance sheet.
Balance sheet- This is regarded as important part of financial statements in order to determine the
financial position of the business at a particular time (Fletcher, 2016). This is regarded as positional
statements which ascertain the financial position of Metro Products Ltd in a particular time period.
It determines financial balance of each and every component involved in various business sectors
like sole proprietorship, partnership, company, private and limited companies. It includes major
factors that are assets and liabilities which are regarded as basic pillar without which balance sheet
is impossible as this ascertains the financial performance of an entity. This is usually prepared at the
end of the year. The benefits of balance sheet are to facilitate variety of business users in
accomplishing their aims and targets. The balance sheet prepared by various businesses to showcase
their ability in order to gain competitive advantage over variety of competitors in the external
market.
1.3
A) Identify the Metro Products Ltd’s various potential stakeholders
Stakeholders plays a significant role in an entity as they are group people who are affected b
the actions of business and do effect the performance of Metro Products Ltd (Hira, 2016). The
preferences and higher expectations of all the stakeholders are to be met by an entity in order to
gain their trust and loyalty in operating their business in a best possible manner. Corporate social
responsibility is that term which is related with the stakeholders as meeting societal obligations by
an entity will facilitate various users of the society to favour the business who take care about their
increasing needs and expectations.
There are various potential stakeholders of Metro products Ltd classified into two important
categories such as internal and external stakeholders of the business is given as below:
Internal stakeholders
Employees- An employee work in the business in order to accomplish desired aims and objectives
framed by the owner in a given time frame (Jorgensen and Rotter, 2016). The employees are
regarded as true representators of the firm who reflects the transparent actions of the business. The
success of an entity is depended on the performance of an employee in the firm which needs to be
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satisfied in the business in order to gain their trust for longer time period. Employee is highly
attracted towards the business to get deserving salary and wages according to their capabilities.
Owners- The owner of the firm tries to maximise their existing profits in order to get higher market
opportunities by eliminating their deficiency lies in each and every business practices. The owners
determine their current financial performance in order to know the weaknesses lies in their current
performance. They will find various alternative options in order to improve the current performance
in order to access future opportunities in the external business environment.
External stakeholders
Shareholders- The owner of the firm invited application from the external environment in order to
fund their business requirements by issuing equity shares (Hosain, 2016). The shareholders are
regarded as important entity whose tastes and preferences are taken into account to retain them with
the business for long time period. The dividend required by al the shareholders for giving money to
the business in exchange of money provided by them to fund the financing business requirements of
an enterprise.
Suppliers- This is regarded as external party who will provide raw material to an entity in order to
manufacture products to meet the higher expectations of various users of the business. The
supplier’s relationship will be formed by the owner in order to balance their entity as lack of
suppliers in the firm induces pressure on business in terms of higher expenses imposed on the
business.
B) Analyse their relative interests, influence and options available to Metro Products Ltd in
managing the interest of the stakeholders
Stakeholders of the business are affected the overall performance of an entity in order to get
the interest in return from the business. The societal pressure imposed on an entity in terms of
products manufacturing, quality of products, customer satisfaction. Higher expectations of all the
stakeholders will be accomplishes by an entity owner that helps in enhancing the overall image of
business in front of all other users.
Employees- The increasing profitability is the basic interest of employees as they will get higher
wages and salaries in the near future (Tsai, 2016). The increased business performance is essential
in order to ensure its survival in the future as stable financial position will be able to meet cost of
employees in the business.
Owners- The financial statements prepared by an entity is to determine the available cost incurred
in the business enterprise as cost is regarded as major concern of the management. The cost sheets
are supplied to the owner to verify the external standards with their actual business performance.
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Shareholders- The higher business performance is reflected with higher amount of sales and the
profits earned by an entity. The shareholder is highly concerned with heavy amount of dividend
given by an entity owner to all the shareholders according to the available share in the firm.
Suppliers- The agreement is formed among supplier and business owner by forming purchasing
agreement in which purchases will be made by the owner. The ability of an entity will be judged in
order to repay all the purchases made on credit as the supplier will highly concerned with the
recovery of total amount.
CONCLUSION
It can be concluded from the above assignment that finance is important gem of the firm
which helps in meeting desired aims and objectives. This report emphasises on legal requirements
of limited company which proves beneficial for Metro Products Ltd in gaining higher market share.
The financial statements requirements help Metro Products in preparation of these statements in
ascertaining financial position of the business. The needs and expectations of different stakeholders
are considered to improve their overall business in attaining all the desired aims and objectives of
the business of Metro Products.
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REFERENCES
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Tsai, L.C., 2016. Household Financial Management and Women’s Experiences of Intimate Partner
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Online
Financial Management and Control, 2014. [Online]. Available through
<http://www.mfin.hr/en/financial-management-and-control>. [Accessed on 28 March 2017].
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