Managing Financial Resources Assignment

Qualification - BTEC Higher National Diploma in Business

Unit number and title - Unit 2 Managing Financial Resources

QFC Level - Level 5

Assignment title - Finance as a resources , Making financial decisions & Analysing financial performance

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Purpose of this assignment

The purpose of this assignment is to give the learners a broad understanding of the sources and availability of managing financial for a business organisation. Learners will learn how to evaluate these different sources and compare how they are used. They will learn how financial information is recorded and how to use this information to make decisions for example in planning and budgeting.

Decisions relating to pricing and investment appraisal are also considered within the unit. Finally, learners will learn and apply techniques used to evaluate financial performance

Scenario (Task 1)
Since embarking upon your Business you have been looking for a new job in finance or accountancy. You have had a number of years of experience working in industry and you would be particularly interested in a role which involved working with and advising local businesses. Eventually you secure a post with a large firm of accountants as a Finance and Business Advisor. This is a new departure for the company who have, traditionally, concentrated upon accountancy and auditing services.

Task 1A

As a starting point, the senior partner in the company suggests that you put together:

A detailed information pack for new and existing businesses which:

Identifies the sources of finance currently available. The pack should be aimed at the full range of business types - new and old, large and small - and for new business start-ups and those wishing to expand.

Assesses the implications of each source including the relative advantages and disadvantages to the business, the legal aspects, the costs and the suitability for purpose.

Provides three case-study examples for businesses. These should include a small business start-up, a large business expansion and small group of people who are looking to buy up an existing medium-sized company. Finance sources should be carefully matched to needs.

(This provides evidence for outcome 1 - assessment criteria 1.1, 1.2 , 1.3 and for outcome 2 - assessment criteria 2.1)

Task 1 B
You are given the following information from the company's financial statement.


£000

£000

From the balance sheet as at

31 March 2003

31 March 2002

Stocks

12482

11862

Trade Debtors

32287

28410

Trade Creditors

17048

13585

Total Asset less current liabilities

47505

34912

Creditors Due after more than one year

13388

6870

Share Capital ( 25p share)

6782

4282

From the profit and loss account for the year ended

31 March 2003

31 March 2002

Turnover

205157

182530

Cost f goods sold

172065

153730

Expenses

27342

22285

Interest Payable

1925

1220

The above information contains information from both the Income Statement of the company and the statement of the financial position. Discuss the purpose of these financial statements.

Analysis of the above information reveals that the company is financed by both debt capital and equity capital. You have been asked by the directors to prepare a short report on the costs of these different sources of finance. You are expected to discuss what factors should be considered by directors when taking decisions regarding the mode of financing.

Selecting suitable sources of finance as 1.1 is an example of financial planning. Discuss other instances of financial planning and analyse the importance of financial planning to the company.

The above information contains extracts from both the Income Statement and Statement of Financial position. Discuss how these statements meet the information needs of various stakeholders of the company.

Discuss how different forms of financing affects the format of the financial statements.

Calculate the following ratios and comment on the performance of the business over the two years;

Cash Flow Forecast for a new business - Northfield Components Ltd: Jan 2008 - Dec 2008

 

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

 

£000

's

£000

's

£000

's

£000

's

£000

's

£000

's

£00

0's

£000

's

£000

's

£000

's

£00

0's

£000

's

Brought Fwd.

40

 

 

 

 

 

 

 

 

 

 

 

Sales

200

300

300

300

250

260

300

260

300

325

265

265

Total Income

240

300

300

300

250

260

300

260

300

325

265

265

Purchases

150

140

135

135

140

130

135

145

140

140

145

145

Wages

55

55

55

55

55

55

55

55

55

55

55

55

Rent & Rates

56

 

 

56

 

 

56

 

 

56

 

 

Light & Heat

 

 

55

 

 

55

 

 

55

 

 

55

Advertising

2

2

2

2

2

2

2

2

2

2

2

2

Insurance

55

 

 

 

52

 

 

 

 

 

 

 

Equipment

50

10

 

10

 

10

 

 

 

 

 

 

Vehicles

20

 

 

 

 

 

 

 

 

 

 

 

Directors Salaries

22

22

22

22

22

22

22

22

22

22

22

22

Motor Expenses

11

11

11

11

11

11

11

11

11

11

11

11

Sundry Expenses

11

11

11

11

11

11

11

11

11

11

11

11

Total

Expenditure

 

432

 

251

 

291

 

302

 

293

 

296

 

292

 

246

 

296

 

297

 

246

 

301

Monthly

-192

49

9

-2

-43

-36

8

14

4

28

19

-36

Deficit/Surplus

 

 

 

 

 

 

 

 

 

 

 

 

Accumulative Deficit/Surplus

 

-192

 

-143

 

-134

 

-136

 

-179

 

-215

 

-207

 

-193

 

-189

 

-161

 

-142

 

-178

Gross profit margin
Stock Turnover
Debtors Collection period ( Debtors Days)
Creditors payment period ( creditors days

(This provides evidence for outcome 2 - assessment criteria 2.1, 2.2 , 2.3 and 2.4 for outcome 4 - assessment criteria 4.1,4.2 and 4.3)

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Scenario (Task 2)

The Financial Accountant of Northfield Components has recently resigned and left his post with immediate effect. The Directors decide to advertise for a replacement but realize that the recruitment process may take up to three months. In the short term they decide to bring in a financial consultant to tide them over until a permanent appointment is made. You are asked by your line manager to take on this role - initially for three months

Task 2A

On your first morning in early January 2008 the Directors present you with the cash budgets prepared by the departed financial accountant. You are given the budgetfor the twelve months from January 2008. The directors are concerned about the likely cash deficits shown in the cash budget.

Cash Flow Forecast for a new business - Northfield Components Ltd: Jan 2008 - Dec 2008

 

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

 

£000

's

£000

's

£000

's

£000

's

£000

's

£000

's

£00

0's

£000

's

£000

's

£000

's

£00

0's

£000

's

Brought Fwd.

40

 

 

 

 

 

 

 

 

 

 

 

Sales

200

300

300

300

250

260

300

260

300

325

265

265

Total Income

240

300

300

300

250

260

300

260

300

325

265

265

Purchases

150

140

135

135

140

130

135

145

140

140

145

145

Wages

55

55

55

55

55

55

55

55

55

55

55

55

Rent & Rates

56

 

 

56

 

 

56

 

 

56

 

 

Light & Heat

 

 

55

 

 

55

 

 

55

 

 

55

Advertising

2

2

2

2

2

2

2

2

2

2

2

2

Insurance

55

 

 

 

52

 

 

 

 

 

 

 

Equipment

50

10

 

10

 

10

 

 

 

 

 

 

Vehicles

20

 

 

 

 

 

 

 

 

 

 

 

Directors Salaries

22

22

22

22

22

22

22

22

22

22

22

22

Motor Expenses

11

11

11

11

11

11

11

11

11

11

11

11

Sundry Expenses

11

11

11

11

11

11

11

11

11

11

11

11

Total

Expenditure

 

432

 

251

 

291

 

302

 

293

 

296

 

292

 

246

 

296

 

297

 

246

 

301

Monthly

-192

49

9

-2

-43

-36

8

14

4

28

19

-36

Deficit/Surplus

 

 

 

 

 

 

 

 

 

 

 

 

Accumulative Deficit/Surplus

 

-192

 

-143

 

-134

 

-136

 

-179

 

-215

 

-207

 

-193

 

-189

 

-161

 

-142

 

-178

Using the information given in the cash budget identify the main problems that Northfield Components are faced with.

Identify the likely causes of the problems and how they might be remedied and avoided in the future.

Make recommendations for improving the cash budget with a view to minimizing the cash deficit or, possibly, generating a cash surplus.

You are required to present your findings and recommendations in a formal written report to the Directors of Northfield Components Ltd.(This provides evidence for outcome 3 - assessment criteria 3.1)

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