Assignment title: Managing Financial Resource and Decision Making (MFRD in Business)
TASK 1:
you are the Finance Manager of a large public company (you should choose one from large public company in UK). The company intends to invest into a new project in the near future. (Life time of the project is 5 years). The finance director has asked you to identify and review the existing source of finance available to business of the choice of the company and evaluate the implication of available source of finance in the finance market to obtain to invest new project. (You should attach as an appendix the financial statements of your choice of the company)
(This provides evidence of learning Outcome: 01 and 02: Assessment Criteria 1.1:1.2:1.3 and 2.1:2.2:2.3:2.4)
TASK 2:
On your first day in early January 2013, the directors present you with two management reports prepared by the departmental financial accountant. You are given the sales budget and the cash flow for the twelve months from period July 2012 to June 2013. The first six months of which include actual sales figure include some variances between budgeted and actual sales. The directors are concerned about the likely cash deficits shown in the cash flow as well as sales performance for the particular period. They are also concerned that they are very unlikely to meet their budgeted sales in the first half of the year July 2012 to December 2012.
(This provides evidence of Learning Outcome: 03: Assessment criteria 3.1)
| Sales Budget for July 2012 – June 2013 | ||||
| Month | Monthly Budget | Actual Monthly | Actual Cumulative | Variance |
| July | 240,000 | 200,000 | ? | -40,000 |
| August | 230,000 | 300,000 | 500,000 | 70,000 |
| September | 270,000 | 360,000 | ? | 90,000 |
| October | 265,000 | 385,000 | 1,245,000 | 120,000 |
| November | 265,000 | 340,000 | 1,585,000 | ? |
| December | 300,000 | 280,000 | 1,865,000 | ? |
| January | 250,000 | ? | ? | ? |
| February | 265,000 | ? | ? | ? |
| March | 300,000 | ? | ? | ? |
| April | 325,000 | ? | ? | ? |
| May | 325,000 | ? | ? | ? |
| June | 350,000 | ? | ? | ? |
You are required to:
(a). Analyse the cash flow and the sales budget for the above period and complete the Sales budget as appropriate.
(b). Make recommendations for improving the cash flow situation with a view to minimizing the cash deficit or, possibly, generating a cash surplus.
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TASK 3
- The following information extracted from Westfield company production department about Product A:
Selling price per unit: £300
Variable cost: £220
Fixed cost: £230,000
- Explain and evaluate the pricing methods (at least two methods)
- Use the above information calculate breakeven point of volume and illustrate how changes in selling price (use 5% increase or decrease) would impact on volume of sales and pricing decision of the product A.
- The management accountant of Westfield Company has recently resigned and left this post with immediate effect. You are asked by your line manager to this role. The directors of the company are considering two alternatives business projects. each of which involves an initial investment of £200,000. The following information relates to two projects are as follows:
| Project | A | B |
| Expected Profits | £ | £ |
| Year 1 | 80,000 | 30,000 |
| Year 2 | 80,000 | 50,000 |
| Year 3 | 40,000 | 90,000 |
| Year 4 | 20,000 | 120,000 |
Estimated resale value at the end of year 4 of each project is £40,000. Profit is calculated after deducting straight line depreciation, the cost of capital is 16%. You are asked to carry out a full investment appraisal of two projects under the following appraisal techniques
- Payback period
- Accounting rate of return
- Net present value
You should evaluate the above techniques and advice the directors appropriate techniques to be used to make a decision on which project in your opinion should be undertaken.
You should assess the viability of a project using investment appraisal techniques
TASK 4:
You are asked to analyse and compare the performance of the below financial statements. Use the data for the two consecutive years, comments on it by making the use of full range of ratios and also all calculations should be attached as an appendix in your assignment.
(This provides evidence of Learning Outcome: 04: Assessment criteria 4.1:4.2:4.3)
Task 1
Understand the sources of finance available to a business.
1.1 Discuss and explain the sources of finance available to a particular organization you chose.
Developments of new products are required for the growth of company but it needs access to huge amount of capital. Country Wide Holdings Ltd is the largest property service group in UK which serves 1500 locations and more than 50 brands. It helps its customers across the residential and commercial property markets. The company is planning to invest in a new project which requires large amount of capital. As a finance manager of the company, it is required to find out the sources of finance available to Countrywide Holdings Ltd. to invest in the new planned project.
There are number of ways of raising finance for a Public limited company. Different types of finance works in different ways for the company. The two major sources of financing a public limited company are:
- Internal Sources: In Internal financing, the sources of finance are procured from inside the business which generally does not cost anything to the business.
- External sources: In External financing, the sources of finance are procured from outside the business, i.e. a third party is involved. These sources of finance cost more for the business because of the involvement of the third party.
Internal Sources of Finance
- Retained Earnings: It is that part of the company’s profit which is not spent by the company. They are retained by the company in the form of liquid assets and so they are easily accessible source for financing.
- Current Assets: Current assets are those assets which can be easily converted into cash. These assets are required to be kept by the company for uncertainties.
- Sale of Fixed Assets: These are the existing fixed assets of the company which are no longer needed by the company like building or machinery. These surplus assets can be sold by the company to contribute money for the new projects or ventures.
External sources of Finance
- Shares: This is one of the best sources of finance available for a limited company. An additional share capital can be issued, or the existing shares can be sold to the investors for a return on their investment.
- Loan: Loan is the most common form of raising capital. It means borrowing from bank and pays the interest in return. There will be an interest rate on the loan which has to be paid by the company.
- Leasing: It is like renting a piece of some property or any equipment of business. The leasing company is paid for a definite time because the machinery or the property belongs to the leasing company.
- Government Finance: A public company can also take loan from the government. The UK government and European Union provide help to the companies to promote high employment and growth to the companies.
There are many sources of finance available to Country Wide Holdings Ltd., out of all the choices it can choose a most suitable source keeping in mind the business conditions, the risks involved and the costs involved with the source. After considering all the factors, the best suitable source of finance is chosen by Country wide Holdings Ltd. to start up a new project.
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