Managing financial resources and decisions

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Running Head: Managing financial resources and decisions 1

Managing Financial Resources and Decisions



[Date of submission]




1.1. Sources of finance available to the business (Task 1 (i))

1.2. Assessment of the implications of different sources (Task 1 (i))

1.3. Evaluations of appropriate sources for the business project (Task 1 (ii))

2.1 Analysis of the costs of different sources of finance (Task 1(i) and Task 2(ii))

2.2. Importance of financial planning (Task 4(i) and (iii))

2.3. Assessment of the needs of different decision makers (Task 4(ii))

2.4. Impact of finance on the financial statements (Task 2(i))

3.1. Analysis of budgets and making of appropriate decisions (Task 4(i))

3.2. Calculation of unit costs and making of pricing decisions using relevant information (Task 3(iii; a, b))

3.3. Assessment of the viability of the project using investment and appraisal techniques (Task 3(i) and (ii))

4.1. Purpose of the main financial statements (Task 2(i) and Task 5(i))

4.2. Differences between the formats of financial statements for different types of business (Task 5(ii))

4.3. Analysis of financial statements using appropriate ratios and comparisons (Task 5(i))


Managing Financial Resources and Decisions


When I started working on this assignment, there were two options for me to complete this assignment; either I prepare this assignment under head of each task and its part or either under Learning Objectives. When I look at tasks’ requirement objective wise, I came into know that multiple tasks have same Learning Objectives. There were second options for me to follow Learning Objectives. I choose the second option and have prepared this assignment according to the assigned Learning Objectives. These Learning Objectives will cover all the requirements of the tasks. As, there was another requirement of the assignment to give the introduction and conclusion of each task, I have given the introduction and conclusion of the assignment task wise.

Given below is the brief introduction of each task’s requirement and Learning Objectives under which the task is covered.

Task 1 (LO: 1.1, 1.2, 1.3, and 2.1)

In this task I as finance Director will set out sources of finance that are potentially available for Kaja Plc to finance their possible investment in new vehicles South Africa. This task includes main features of two long term and two short term sources of finance including main advantages and disadvantages of each of sources. It will also include recommendation with reason concerning which source the company should use to finance the proposed investment.

Task 2 (LO: 2.1, 2.4, and 4.1)

In this task we will take a look on the impact of raising 100 million pounds through equity and debt. We will also explain the concept of the weighted average cost of capital (WAAC) by using an appropriate formula.

Task 3 (LO: 3.2, 3.3)

In the task we will calculate payback period and present value of the proposed investment. There will be some recommendations on the basis of result of calculations. Concept of unit cost will also be defined with its calculation. There will be a discussion what factor an organisation (Kaja Plc) should take into account when they set prices.

Task 4 (LO: 2.2, 2.3, and 3.1)

There will be some comments on the trends and messages contained within the cash flow forecast of the company. There will be identification of different groups who may have an interest in the factory’s cash flow statement and in other statements. There will be discussion regarding the company’s profitability and problems with its liquidity.

Task 5 (LO: 4.1, 4.2, and 4.3)

There will four financial ratios analysis of Plc’ profitability and liquidity performance 2013 /14. There will be an analysis of differences between the financial statements of different types of businesses.

1.1. Sources of finance available to the business (Task 1 (i))

At the point when an organization is becoming quickly, for instance when considering investment in capital supplies, its present financial resources may be deficient. Few developing organizations have the capacity to back their extension plans from cash flow alone. They will along these lines need to consider raising fund from other outer sources. (Abdulwahed, 2013)What's more, managers who are looking to purchase into a business or purchase out a business from its managers might not have the resources to obtain the organization? They will need to raise fund to accomplish their targets. (Alattar, 2008)

There are a number of potential sources of finance for Kaja Plc to finance their possible investment in new vehicles South Africa.

  • Existing shareholders and directors stores
  • Business holy messengers
  • Clearing banks (overdrafts, short or medium term advances)
  • Factoring and receipt marking down
  • leasing and Hire purchase
  • Venture capital (Alattar, 2008)

As a money Director of the organization, a key thought for in picking the source of new business fund is to strike a harmony in the middle of equity and debt to guarantee the financing structure suits the business.

The primary contrasts between acquired cash and equity are that bankers appeal interest installments and capital reimbursements, and the obtained cash is typically secured on business assets or the individual assets of shareholders. (Al Malki, 2008)A bank likewise has the ability to place a business into organization or bankruptcy in the event that it defaults on debt interest or reimbursements or its prospects decay. (Al Malki, 2008)

Following are two long term and two short term sources of finances with their advantages and disadvantages. (Al Malki, 2008)



Payback Terms




Friends & Family

Usually good rate or none

Very flexible

Could be any

Flexible, best value

Can create friction



30 days +/-

Unsecured, Inexpensive,

Short term

Venture capital


5-7 years


Can get large amounts

Very hard to get; share ownership



1-5 years


Generally least expensive

Generally hardest to qualify for

1.2. Assessment of the implications of different sources (Task 1 (i))

As an account Director of the organization, I consider that financial establishments that rise above national limits and take part in such exercises as over-the-counter subordinates contracts, far reaching interbank contracts, quit, bond, and exchanging exercises, and syndicated credit issuance, universally has prompted stronger advancement, interconnections, and development. (Alattar, 2008)While more tightly interdependencies can expand the proficiency of the worldwide financial framework by smoothing credit assignment and risk enhancement, they have additionally expanded the potential for cross-market and cross-outskirt interruptions to spread quickly. (Bennett, 2005)Likewise, financial developments have empowered risk exchanges that were not completely perceived by financial controllers and organizations themselves, and have convoluted the appraisal of arrangement reactions, counter gathering risk, and risk administration. Despite the fact that linkages crosswise over establishments have generally centered on dissolvability concerns, the current emergency helps us to remember the significance of liquidity overflows, particularly that (Berrebi, 2009)

  • Interconnectedness implies challenges in moving over liabilities may overflow to the financial framework all in all; and that
  • Rollover risk connected with fleeting liabilities is display in the saving money part as well as, similarly essentially, in the non clear financial area. Along these lines, it is crucial to enhance our understanding and checking of immediate and aberrant financial systemic linkages, including by reinforcing methods to evaluate systemic connection ages, and consequently add to making systemic-centered supervision doable.

1.3. Evaluations of appropriate sources for the business project (Task 1 (ii))

As we saw in prior parts, that there are various methods for raising money for the business. The kind of fund picked relies on upon the way of the business. Expansive associations have the capacity to utilize a more extensive assortment of account sources than are littler ones. Investment funds are an undeniable method for placing cash into a business. A little business can likewise get from families and companions. Interestingly, organizations raise fund by issuing shares. Huge organizations frequently have a large number of distinctive shareholders. (McNiff, 2010)

The organization might likewise fit the bill for awards. Government and private trusts are once in a while made accessible to organizations that meet certain conditions. Case in point concedes and advances may be accessible to firms setting up in rural zones or where there is high unemployment. (Berrebi, 2009)

For Kaja Pls to increase additional account for proposed investment, I suggest the organization ought to take out an advance from a bank or other financial foundation. The advance will be an entirety of cash loaned for a given time of time. Reimbursement will be made with interest. The bank of cash will need to know all the business opportunities and risks included and will accordingly need to see an itemized strategy for success. The moneylender may additionally need some manifestation of security ought to the business run into financial trouble, and may along these lines like to give a secured credit. (Fenich, 2005)

An alternate method for raising fleeting money for the proposed investment could be through an overdraft office with a bank. The organization will be offered authorization to take out more from their account than they have put in. As we realize that the bank settles a greatest limit for the overdraft. Interest is charged on the overdraft every day. (Mulvaney, 2007)

2.1 Analysis of the costs of different sources of finance (Task 1(i) and Task 2(ii))

The Kaja Plc might raise new funds from the following sources:

The capital markets:

  • New share issues
  • Rights issue
  • Loan stock
  • Business expansion scheme fund
  • Government source
  • Retained earnings
  • Venture capital
  • Bank borrowing (Al Malki, 2008)

Ordinary shares

Conventional shares are issued to the managers of an organization. They have a nominal or "face" value, regularly of $1 or 50 pennies. (Berrebi, 2009) The business sector value of a quoted organization's shares bears no relationship to their nominal value, aside from that when conventional shares are issued for cash, the issue price must be equivalent to or be more than the nominal value of the shares. (Berrebi, 2009)

Deferred ordinary shares

Are a manifestation of customary shares, which are qualified for a profit when a certain date or if benefits climb over a certain sum. Voting rights may likewise contrast from those joined to other common shares.

Ordinary shareholders place stores into their organization:

  • By paying for another issue of shares
  • Through held benefits. (Bennett, 2005)

Weighted Average Cost of Capital (WACC)

A count of an association's expense of capital in which every classification of capital is proportionately weighted. All capital sources - regular stock, favored stock, bonds and whatever other long haul debt - are incorporated in a WACC figuring. All else parallel, the WACC of firm increments as the beta and rate of profit for equity increments, as an increment in WACC takes note of an abatement in valuation and a higher risk. (Fadhil, 2012)

The WACC comparison is the expense of every capital segment duplicated by its relative weight and afterward summing:

Weighted Average Cost Of Capital (WACC)



D = market value of the firm's debt

E = market value of the firm's equity

Rd = cost of debt

Re = cost of equity,

V = E + DE/V = percentage of financing that is equity

Tc = corporate tax rate

D/V = percentage of financing that is debt

All the detail given in the task is same and supposes tax @ 34%

The WAAC of the proposed 100 million projects is 4.23%. (Berrebi, 2009)


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