Managing Financial Resources: Assessment Report - [University]

This report provides a comprehensive analysis of financial resource management, focusing on profitability, pricing strategies, and financial ratio analysis. It begins with an introduction to financial resources and their importance. The report then delves into a pricing strategy analysis, examining how a company can determine optimal prices to maximize sales and profit, considering factors like competition and customer perception. The report also explores the cost-plus pricing method, outlining its advantages and disadvantages in relation to pricing decisions. Finally, the report analyzes key financial ratios such as current ratio, quick ratio, and debt-equity ratio, providing insights into the company's liquidity, solvency, and overall financial health. The report concludes with a summary of findings and recommendations for effective financial resource management.

Managing financial resources
Assessment BRIEF 2

Table of Contents
Introduction......................................................................................................................................3
Question 1....................................................................................................................................3
Question 2....................................................................................................................................5
Question 3....................................................................................................................................6
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

Introduction
The following report focuses on managing financial resources. Financial resources refers to the
path through which company obtain the funds to run their business and date today expenses. This
report provides detailed information about profitability level of output of the company and it also
provides details about the pricing strategy of the company. Besides this cost plus approach is
being discussed in this report. This report speaks about various ratios such as current ratio quick
ratio debt equity ratio and proprietary ratio as well.
Question 1
Total units = 100
Price Units Total Amount
95 10 950
90 20 1800
80 30 2400
75 40 3000
60 50 3000
55 60 3300
50 70 3500
45 80 3600
40 90 3600
35 100 3500
Fixed cost of the business is 2500 a week
Variable cost is £20 on each unit
So the variable cost which is being imposed on the company is £20*100
=2000
So the company should take such prices from the customer where company can recover its cost.
In this case the marginal cost which is being provide on the company as 2,500 week. Only
increase profit when it says more units.

Profit = Total revenue – Total cost
So the total revenue of the company will increase when its sales will increase. Due to
competition customer has wide choices they can buy the products from other companies
(khamatkhanova, 2018). UK tools Limited cannot able to sale hundred units at the price of 100.
But when the company cut down its prices then it reflects the impact on their sales. After
reducing 5 Euro Company is able to sell 10 more units. On the other hand when the company
reduces the price and when company started selling the products at rupees 95 then its 10 units
were get sold at rupees 950. Besides this company continuously started decreasing their price by
5 Euro so at 90 20 units of the company get sold and Company get 1800 Euro. It rupees 80 30
units of the company get sold same as at rupees 75 40 units easily get salt and company attend
3000 Euro. But when company sell the products at 35 Euro then all the units of the company get
sold. But company can’t take different prices from different customers otherwise it may lose
customers and it will affect the goodwill of the company as well. But company can only gain
profit when the revenue of company is higher than its cost in such case company will get profit
and use much profit to enhance the productivity and also it may offer a wide range of products to
the customers. Price is very important aspect for customers as customer wants best quality
product at affordable prices. They want better product at cheap prices and this is the
responsibility of company that they must provide good quality products to the customer at a very
good range of prices so that customer can easily purchase the products provided by the company
otherwise as customers have many choices they can switch to any other company who is dealing
in the similar products and providing them products at cheap prices (Marianos and et.al 2017).
Customers at the very important part of company when company do not have a good customer
base then it become very difficult for the company to survive in the market. So the company
should sell its units at rupees 40 so that 90 units of the company will get sold and it will earn a
profit of 3600 through which it can deduct the cost of manufacturing and other. Through which
most of the units of the company will get sold easily and earn good profit. As the main aim of the
companies to increase the sales when the more and more people will buy the products of the
company then they will do mouth publicity of the product which is one of the important tool for
the company. When the customer themselves market the product of the company then it will
definitely going to increase the goodwill and reputation of the company in the market and in
result company will attend more profit and good market share. Another thing which the company

can do is that they can conduct market research to know about the needs and perception of
customers and also with the help of market research company can know how much customer can
pay for the products due to which company can increase the profitability in any circumstances.
Apart from this company can take feedback from its existing customers to know about the quality
of product so that if they found any issue with the product with the help of Feedback Company
can reduce such issues and increase the revenue and sales. Apart from this by cutting cost
company is easily selling the product in the market and also it is enhancing the profitability by
decreasing the price. So pricing strategy is working in the favour of the company and with the
help of cost cutting company is increasing sales and revenue.
Question 2
Cost plus pricing is popularly known as mark-up pricing in which company decides the cost of
the product and also add a percentage of a profit margin then they decide the selling price
product (Mutekwe, 2020). Cost plus pricing technique is one of the simplest ways of deciding
the cost and pricing strategy for the product and goods of the company. In cost plus pricing
company decides the price of all the direct material cost labour cost and overhead then company
decide the overall cost of the product so that it can recover all the costs such as raw material
direct material labour etc. To decide the total cost company can use fixed cost and variable cost
so that company make a 10 overall profit margin through which it can reproduce the goods for
future. One of the biggest advantage of Cost plus pricing is back it is very simple to use and any
company can use this method because it is easy to apply and also it is not time consuming and
expensive for the company. Company need to decide the price on accounting period so that they
can build accurate cost and decide the profit margin. With the help of cost plus pricing company
can know how much cost we should decide so that taken on the profit margin and also it becomes
affordable for the customer as well. If the company put high cost on the manufacturing and also
the decide high profit margin then it will become difficult for the product to get sold easily
because customers do not want to spend ample of money on buying a single product. As the
mentality of customer is that they want to purchase best product at less prices so company also
have to make sure about the perception of customers. Show with the help of cost plus pricing
method complement to the needs and desires of the customer and how much they can pay for the
product it can also be gathered from cost plus pricing method (Setyawati andet.al 2018). With the
help of this method company can know about the products which are being sold by the

competitors in the market. With the help of cost plus pricing method company can reduce the
cost of manufacturing labour and wages so that they can sell products at cheap prices and gain
the competitive edge in the market. So cost plus approach definitely influence the pricing
decision of the company. It is one of the easiest method to know the cost of the product but it has
some issues which has to be faced by the company such as
Competition
Cost plus pricing approach totally ignored the competition whenever any company decide the
price of its product by imposing cost plus pricing method then when the company sell the
product in the market they get surprised by knowing the prices of its competitors as they are
totally different. So this think impacts the market share and profit of the company thoroughly.
Company may charge very low price of the product as compared to its competitors or it may
charge very high prices from the competitors. So overall it impacts the profitability and Goodwill
of the company.
Customer
This pricing method works for the benefit of company as company may decide profit margin but
it does not include customer and their perception (Jati, 2019). Sometimes customer film to paid
more if they love the quality of the product. Show the willingness of customer to pay for the
product depends on the quality of the product if the company selling good quality product then I
will not think to pay high prices.
Question 3
Current ratio
Current Assets = 36000
Current liability = 20000
0.92
Current ratio as one of the financial ratio is also known as liquidity ratio which is implemented
by the company to know the ability and capacity to pay their short-term obligations within a year.
It also helps the investors to know how a company is using their current assets to fulfil their
current obligations. If the current ratio of the company as lower than the industry average ratio
that it shows that company is in default and not able to prepared short term obligations (Kumar
and et.al 2019). Current ratio uses such assets which can easily turn into cash or cash equivalent

within a year. This ratio is helpful for the company with the help of current ratio of company can
easily repay their short-term obligations and loans and it will also improve the goodwill and
reputation of the company. It shows that company is effective and capable of converting its
current assets to repay the debts.
Quick ratio
Current Assets = 36000
Current liability = 20000
Current inventories = 1200
0.24
Quick ratio is used as an indicator by the companies to know their short term liquidity position
and it also recognise the ability of company to meet their short term debts and obligations. This
ratio provides necessary information to the company to use its cash assets to repay the
obligations. Quick ratio is more conservative and effective than current ratio. If the quick ratio of
the company is higher it shows that company has good liquidity and financial health and if the
company has lower liquidity ratio it shows that company has to struggle with keeping their debts
and loans (Muslih, 2019). Quick ratio calculated by adding cash and cash equivalents marketable
securities account receivables and it is divided by current liabilities. The quick ratio of the
company is not up to the industry average so company may face difficulties in living their
applications and short term loans. This also helps the investor to make certain decisions whether
they want to invest in the company or not by seeing quick ratio of the company. Basically this
ratio indicates that company must have efficiency to convert their assets to repair the loans and
applications.
Debt- equity ratio
Total liability = 120000
Shareholder’s equity = 40000
= 3
The main motive of using debt equity ratio but the company is that they want to evaluate the
financial leverage. Is ratio calculated by dividing total liability of the company from its
shareholders equity? This is one of the important metric which basically used by corporate
finance. This ratio is also known as risk ratio and bearing ratio. This ratio provides the detail of

total debt and financial liabilities as compared to shareholders equity. This ratio provides critical
information about the capital structure of the company as compared to their equity finance and
debt. Debt to equity ratio calculated by adding short term and long term that along with other
fixed payments of the company and all these get divided by shareholders equity. In this company
debt to equity ratio are 3 which are quite good in mains publish able to repair its applications on
given time duration. You are also providing necessary information to the investors about the
capacity and ability of the company to prepare their obligations. This ratio also helps the
company by letting them know how much efficiency they have to prepare their obligations.
Through which company can improve their goodwill and reputation.
Proprietary ratio
Stakeholder’s equity = 40000
Total assets = 120000
=33.33%
Proprietary ratio shows the proportion of shareholders equity in the total Assets of the company.
Provide estimation about the amount of capitalisation to the company. If the proprietary ratio is
high it shows that company has enough capital finance its day-to-day business and the financial
structure of the company is strong. But on the other hand if the proprietary ratio of the company
is low it shows that company has to stay dependent on debt and other loans to conduct their day-
to-day operations smoothly (Alpi, 2018). Ratio is calculated by dividing the shareholders equity
to total tangible assets so that company can know the exact position and how much capital they
need more to run their day to day expenses effectively. Sometimes this ratio fail to provide
adequate information to the company when the business do not have proper capitalisation so it is
in the hand of Management two property managed the death penance of the company and also
they should provide all the details about the capital requirement by the company.
Conclusion
After analysing the entire report it is concluded that this report focuses on managing financial
resources of the company. In this report profitable level of output the product of company is
being mentioned and it helps the company to decide best course for the product so that it can
enhance the sales and revenue. Apart from this cost plus approach of pricing decision is being
mentioned in this report. It helps the company to decide the prices of product with the help of

course plus approach. Is report state about various ratios such as current ratio quick ratio debt
equity ratio and proprietary ratio? How this ratio can help the company to improve their overall
financial position is being discussed in this report.
References
Books and Journals
Alpi, M.F., 2018. Pengaruh Debt To Equity Ratio, Inventory Turn Over, Dan Current Ratio
Terhadap Return On Equity Pada Perusahaan SektorFarmasi Yang Terdaftar Di Bursa
Efek Indonesia. The National Conference on Management and Business (NCMAB)
2018.
Jati, W., 2019. The Effect of Financial Leverage, Operating Leverage and Current Ratio on
Profitability at PT. ManunggalPersada Jakarta. PINISI Discretion Review.3(2). pp.135-
142.
KHAMATKHANOVA, M.A., 2018. Systematization of models and methods in managing
financial resources of companies. Revista ESPACIOS. 39(18).
Kumar and et.al 2019. A p-channel GaNheterostructure tunnel FET with high ON/OFF current
ratio. IEEE Transactions on Electron Devices. 66(7). pp.2916-2922.
Marianos and et.al 2017. Managing Financial Resources in Late Antiquity. Greek Fathers’
Views on Hoarding and Saving, Athens.
Maulita and et.al 2018. Pengaruh Debt to equity ratio (DER), debt to asset ratio (DAR), dan long
term debt to equity ratio (LDER) terhadapprofitabilitas. JAK (JurnalAkuntansi):
KajianIlmiahAkuntansi, 5(2).pp.132-137.
Muslih, M., 2019. PengaruhPerputaranKasdanLikuiditas (Current Ratio) terhadapProfitabilitas
(Return on Asset). KRISNA: Kumpulan RisetAkuntansi.11(1).pp.47-59.
Mutekwe, E., 2020. Embracing equitable learning in managing the physical and financial
resources in South-African-schools: A social justice perspective. South African Journal
of Education.40(4).
Setyawati andet.al 2018. The Role of Current Ratio, Operating Cash Flow and Inflation Rate in
Predicting Financial Distress: Indonesia Stock Exchange. JDM
(JurnalDinamikaManajemen).9(2). pp.140-148.

Solihin, D., 2019. Pengaruh Current Ratio dan Debt To Equity Ratio Terhadap Return On Asset
(ROA) Pada PT Kalbe Farma, Tbk. KREATIF: JurnalIlmiah Prodi
ManajemenUniversitasPamulang.7(1). pp.115-122.