Managing Financial Resources and Decisions (Article Sample)

Managing Financial Resources and Decisions
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Table of Contents
TOC \o "1-3" \h \z \u Introduction………………………………………………………………………………………3
Task 1…………………………………………………………………………………………….3
1.1 Sources of Finances Available for Business Organization3
1.2 The Implication of these Sources of Finance PAGEREF _Toc389466698 \h 4
1.3 Appropriate Source of finance PAGEREF _Toc389466699 \h 4
Task 2……………………………………………………………………………………………...5
2.1 Analyze the costs of different sources of finance…………………………………………….. PAGEREF _Toc389466701 \h 5
2.2 Review the importance of financial planning…………………………………………………6
2.3 Explain the importance of information for the process of decision making………………….7
2.4 Explain how various sources of finance appear in different financial statements……………7
Task 3……………………………………………………………………………………………..7
3.1 Explain how financial decisions are based on budgeting……………………………….......... PAGEREF _Toc389466713 \h 8
3.2 Explain by calculating the unit costs and make pricing decisions using relevant information. PAGEREF _Toc389466722 \h 9
3.3 Compare the following investment appraisal approaches by showing calculation output; payback period, rate of return, net present value and IRR of given firm information…………10
Task 4……………………………………………………………………………………………11
4.1 Review the main financial statements………………………………………………………. PAGEREF _Toc389466724 \h 12
4.2 Create and compare the appropriate formats of financial statements for different types of business………………………………………………………………………………………….. PAGEREF _Toc389466725 \h 13
4.3 Interpret financial statements of given firm below, using appropriate ratios Profitability Ratios…………………………………………………………………………………………….14
Conclusion……………………………………………………………………………………….1 PAGEREF _Toc389466726 \h 4
Bibliography…………………………………………………………………………………….. PAGEREF _Toc389466727 \h 15
Introduction
Entrepreneurs usually have the ambition to invest in a new business to fill the community gap so that they can manage their own businesses without the influence of other stakeholders. It is therefore important to start my own business to exercise full control and also to ensure that I use all the profits generated by the business. I would like to start American restaurant that does not only offer high quality healthy food stuffs but also sell them at a reasonable prices to meet the local needs of different households (Arnold, 2007). The cost of my investment is budgeted at £120,000 and my main focus is to reduce the initial cash outlay but to maximize annual profits.
Business Description
It is not easy to start a restaurant. It requires high capital outlay which may be obtained from different sources of finance. To have effective restaurant with high competitive advantage, it is important to introduce other food stuffs which has not been there in other restaurant and also to offer good customer service. It is very hard to run this kind of business as it needs a number of business operations. To manage this business, there are a number of preliminary expenses which need to be met and they include
Expenses

Cost

Specialist equipment

£30000

General business equipment

£20,000

Office filings

£6130

Security measures

£5000

Staff facilities and salaries

£3000

Business signs

£1050

Vehicle

£33000

Other costs

£21000

Total

£121,000

Task 1
1.1Available sources of Finance to a business
There are different sources of finance that can be used to finance this business organization. They include personal savings, Bank loans, hire purchase, leases and credit facilities. Personal savings is a very important source of finance that can be used to finance an investment project. It is generated from personal accounts where the investor can either give an asset to the business or use money from other sources to finance the business project (Dyson, 2010). Bank loan is also a very accessible source of finance but only require the investor to pay interest on loan and ensure that there is an asset to act as security for it to be awarded. It is also important to use hire purchase as a source of finance for this business. The business organization can also hire some assets which they pay for in installment basis (McGraw-Hill, 2005). This will give the business an opportunity to use certain assets before fully paying for them. It can also lease some assets such as land and buildings to ensure that the business starts before acquiring all the assets.
1.2 Implication of different sources of Finance
Personal Savings
This source of finance is cheap as compared to other sources of finance. It does not compel the business to pay any interest on it and this makes it an appropriate source of finance. It also has no legal implication as the investor does not enter into agreement with any stakeholder.
Bank Loan
This source of finance has both legal and financial implications (Abernethy and Brownell, 2003). The acquisition of this source of finance requires the bank an...