Anjelica's Managing Financial Decisions Final Latest

London School of Science & Technology
Assignment front sheet
Qualification
Unit number, title and level
Pearson BTEC Level 5 HND Diploma in Unit 2: Managing Financial Resources and Decisions
Business (QCF)
Student name and ID number
Priyanthi Fernando(H1504607)
Level : 4
Assessor name
Simon Masuku
Interval Verifier
Alan Jeffery
Date issued
Completion date
1st May 2015
3rd July 2015 before 12:00 midday

Managing Financial Resources and Decisions - Shaping Your Future
Assignment title
LO
Learning
Outcome
Understand
the sources
of finance
LO1
available to
a business
Understand
the
importance
of financial
LO2
planning
and
information
LO3
needs.
Be able to
A Vocational Scenario
In this assessment you will have the
Assessmen
opportunity to present evidence that
t Criteria
shows you are able to:
Identify the sources of finance available
1.1
to a business
Assess the implications of the different
1.2
sources
Evaluate appropriate sources of finance
1.3
for a business project
Analyse the costs of different sources of
2.1
finance
Explain the importance of financial
2.2
planning
Assess the information needs of
2.3
different decision makers
Explain the impact of finance on the
2.4
financial statements
3.1
Analyse budgets and make appropriate
3.2
decisions.
Explain the calculation of unit costs and
make
financial
Submitted on
decisions
make pricing decisions using relevant
based on
information.
Assess the viability of a project using
financial
3.3
Unit 2: Managing Financial Resources and Decisions Level 4 May 2014
Task
no.
Evidence
(page no)

information
LO4
investment appraisal techniques.
Be able to
4.1
Discuss the main financial statements.
evaluate the
4.2
Compare appropriate formats of
financial
financial statements for different types of
performanc
business.
Interpret financial statements using
e of a
business.
4.3
appropriate ratios and comparisons,

both internal and external.
Instructions
An electronic copy of your assessment must be fully uploaded by the deadline date and time.
You must submit one single PDF or MS Office Word document. Any relevant images or
screenshots must be included within the same MS Office Word or PDF document.
The last version you upload will be the one that is marked. Your paper will be marked if you have
indicated this as your final submission.
Review the mitigating circumstances policy for information relating to extensions.
The file size must not exceed 20MB.
Answer the criteria in order, clearly indicating the pass criteria number.
Ensure that all work has been proof-read and checked prior to submission.
Ensure that the layout of your documents are in a professional format with font style Arial, font
size 12 for the text, font 14 for sub heading and font 16 for main heading, line spacing 1.5 and
justified.
Use the Harvard referencing system; otherwise it will be considered as plagiarised work.
Ensure that you back-up your work regularly and apply version control to your documents.
Ensure that any file you upload is virus-free, not corrupted and not protected by a password
otherwise it will be treated as a non-submission.
You must NOT submit a paper copy or email of this assessment to any member of staff at LSST.
Your work must be original with the appropriate referencing

Learner declaration
I certify that the work submitted for this assignment is my own and research sources are fully
acknowledged.
Student signature: Priyanthi Fernando(H1504607) Date: 02/06/2015
In addition to the above PASS criteria, this assignment gives you the opportunity to submit eviden
MERIT and DISTINCTION grades
Grade Descriptor
M1Identify and apply strategies to
Indicative characteristics
Effective judgements have been
Cont
M1: To achieve M1, you are req
find appropriate solutions
made.
current ratio, ROCE etc.) to the
investors and competitors. Pro

M2 Select / design and apply
A range of sources of information
(Task 4)
M2: To achieve M2, in a report
appropriate methods / techniques
have been used.
other sources of finance would
selected in 1.3. Justify your po
at your conclusions with referen
Shaping Your Future future p

M3 Present and communicate
The appropriate structure and
format. (Task 1)
M3: To achieve M3, you will ide
appropriate findings
approach has been used.
stakeholders in The organisatio
section. This will be presented
a formal letter) or a comparison

D1 Use critical reflection to
terminology accurately. (Task 3

D1: To achieve D1, this questio
Conclusions have been arrived at
evaluate own work and justify valid through synthesis of ideas and
have been justified.
conclusions
D2 Take responsibility for
investment appraisal technique
in the process of strategic inves
(Task 3)
D2: To achieve D2, Use the dra
Importance of interdependence
managing and organising activities has been recognised and

achieved.
that the balance sheet does no

7,000 which will be paid back
1500 per year payable at year

enable the financial report belo

D3 Demonstrate convergent
Effective thinking has taken place
D3: To achieve D3, explain the
/lateral / creative thinking
in unfamiliar context.
differentiation) between:
Current and acid test ratios
Gross profit and net profit (Task

Assignment Brief
Unit number, title and level
Unit 2:Managing Financial Resources and Decisions ; Level : 4
Qualification
BTEC Level 5 HND Diploma in Business
Date issued
1st May 2015
Completion date
3rd July 2015 before 12.00 midday
Assessor
Simon Masuku
Internal Verifier
Alan Jeffery
Managing Financial Resources and Decisions Shaping Your
Assignment title
Future- A Vocational Scenario
Purpose of this assignment

This unit is designed to give learners a broad understanding of the sources and availability of
finance 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.
Instructions
The pages which follow under the heading Shaping Your Futures section needs to be to be
developed as part of your learning journey. Once written, the aim is that the plan is revisited
occasionally and, towards the end of your course, it will act as a portfolio document. This
document will reflect and evidence your learners journey, demonstrating the application of the
relevant learning outcomes to the business depicted in the Shaping Your Future section of this
paper. It is envisaged that you will able to use this document as an accessible illustration of your
learning and understanding.
Please carry out the following steps in order to complete the Shaping Your Future section:
1. Select an organisation. The organisation that you chose should be either an organisation that

you own, an organisation that you would like to own, or one that you work for.
2. Complete the Shaping Your Future section before attempting to answer any of the questions.
Many of the questions in this paper will require that you refer to the information in the Shaping
Your Future section
3. Please read all the questions in this paper and apply your learning to the Shaping Your Future
section.
This section will act as the case study for your assignment paper.
Please note that LSST will not publish or use this information for commercial purposes.
Shaping Your Future

The Background Information
Whose plan is this?
Lenard Kurera
Business and owner details:
Bella vista Restaurant/Lenard Kurera
Business name:
Bella vista
Owner(s) name:
Lenard Kurera
Business address and postcode:
27 Wembley road Wembley WH7 4NS
Business telephone number:
07477226625
Business email address:
Bellavistarestaurant@co.uk
Section one
Executive summary
1.1 Business summary:
It is a Italian Authentic restaurant that going to provide Italian Authentic foods to the local
Community.
1.2 Business aims:
Main aim is to provide the good quality foods ,make good profit ,
11

Save more customers than competition.
Additional Information:
Details of future training courses you or your team want to

NVQ level 3 Food Handling and Hand hygiene course.
Section two
Products and services
2.1 What is the nature of your business?
a product
x
a service
both
2.2 Describe the different types of product/service you are going to be

A range of authentic Italian Cuisine including starters, main course and desserts
2.3 Additional information:
13

Section three
The business environment
.
31 Who are your customers
People who they are dining out e.g.: 10% Couples, 70% families, 20% others.
3.2 Describe your typical customer:
Local residents, people who have been, others trying out a new experience.
3.3 Where are your customers based?

Local area and the peoples travelling to local area for the good foods.
Because now a days people will search every things in marketing online
And they discover new dining locations.
3.4 What factors help your customers choose which business to buy from?
Customers Imagine is clean and quality hygiene foods and the good price.
3.5 Have you sold products/services to customers already?

yes
x
no
If you answered yes, give details:

Section four
Market research
4.1 What market information have you obtained so far?
15

Italian restaurants often dont serve Authentic Italian foods, henceforth
Why I have done my research in the food industries. Open my own
Authentic Italian Restaurant.
4.2 Do you intend to conduct further market research?
By staying ahead of the competitors, I have to organise the distribution and collection of customer
4.2 Key findings from research:
Often Italian restaurants dont offer to customers taste of proper Italian, but they do not Market authentic I

N/A
Section five
Marketing and Business Strategy
What are you going to do/ How are you going
Why have you chosen this marketing method?
to market your products?

1. Design and distribute leaflets to households
1. To inform the local people of our presence
in the local area,

2. Advertise in the local paper
2. To increase possible trade
17

3. Promote the visibility via our website.
3. To attract telephone orders
TOTAL COST
19

Section six
Competitor and market analysis
6.1 Table of competitors (top 5 competitors only)
Name, location
Product/service
Price
Strengths
Weaknesses
They have good online
They got high prices.
presence, and the good
Some of customers cant
revives online.
reach that much.
The restaurant its clean
They have got poor
and its advertisements are
customer service, so the
attractive.
relationship with customers
and business size
Mushroom Italian
The Cozze alla marinara
6.50
restaurant
Wembley high road,
Wembley
Fonduta formaggi
6.25
Zizzi restaurant
Lake side way
is losing.
Wembley
Customer service and the
Simple spaghetti with tomato
Ask Italian
6.50
presentation of the food is
sauce
The foods itself is not tasty
very good
Wembley
Spaghetti all Astice
Unit 2: Managing Financial Resources and Decisions
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Customer services are

20
Since the price of the food

Name, location
Product/service
Price
Strengths
Weaknesses
Belvedere restaurant
good and the presentation
is fairly high, they are
Abby parade Ealing
of the food also good.
going to end up losing
and business size
middle class customers.

Pizza margarita
5.90
Cheap prices so everyone
The size of the pizza shop
Pizza express
can afford it. And its also
is quite small which mean
Empire way Wembley
tasty.
it can only accommodate a

certain amount of people.
6.25
6.2 SWOT analysis:

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Weaknesses
Strengths
Introduce a low cost products than other restaurant
Introduce healthy foods
I havent got enough staff, and the enough money to fund, any
long term deficits in working capital.
Offering quality foods
Limited employers
restaurant
Minimum space
Offer special promotion
Ordering and controlling weaknesses
Providing decor that makes the fun of eating our
Opportunities
Threats
Gaining a licence to sell alcohol with increase revenue.
Several companies have opened near by
Offering: Halas meat, Gluten free option, free range egg
Poor cash floor that could be caused by bank if they
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and dairy and other organic produce.
withdraw our overdraft. For any reason.
Offering home delivery service drive
Medical danger warning over the eating of pasta.
6.3 PEST analysis

PEST analysis (political, economical, social, and technological) assesses a market, including competitors, from the standpoint of a particular
proposition or a business.
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criteria examples
criteria examples
ecological/environmental current Political
Economic
legislation
future legislation : e.g. pasta is found
future legislation
to be harmful to health.
international legislation
home economy
economy trends
economy trends
general taxation
overseas economies
regulatory bodies and processes regulatory bodies and processes :
general taxation
government policies
e.g. standards of new hygiene rules
taxation specific to
government term and change
are too expensive
product/services
trading policies
seasonality issues
funding, grants and initiatives
trading policies: if hours for license
market/trade cycles
home market pressure- groups
are too restrictive
specific industry factors
international pressure- groups

wars and conflicts
market routes trends

wars and conflicts: e.g. if Italy and
distribution trends
UK break trade relation the Italian
customer/end-user drivers
supplies with be difficult to obtain.
interest/ exchange rates

international trade and
monetary issues
criteria examples
Social
Technological
lifestyle trends
Lifestyle trends: people may choose
Competing technology development:
competing technology
demographics
not to eat out in the future so much
We must try to use advanced
development
technology for cooking, cleaning and
research funding
consumer attitudes and opinions for a variety of reasons.

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criteria examples
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media views
law changes affecting social
Demographics: Elderly may not eat
factors
out as often as the young and middle
brand, company, technology
aged.
processing orders in order to reduce
associated/dependent
cost, time and improve efficiency.
technologies
replacement
Consumer buying; future customers
technology/solutions
image
may choose to complete their
maturity of technology
consumer buying patterns
purchases online and request a
manufacturing maturity and
fashion and role models
delivery service. This will reduce costs capacity
major events and influences
on waiting service and size
information and
buying access and trends
requirement of restaurant.
communications
ethnic/religious factors
consumer buying
advertising and publicity
mechanisms/technology
ethical issues
technology legislation
innovation potential
technology access, licensing,
patent intellectual property
issues global
communications
6.4 Unique Selling Point (USP):
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Unique Selling Point (USP)
Our prices will be lower than competitors due to being a family business.
We will excel on the health aspect of food delivery.
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Section seven
Operations and logistics
7.1 Production:
On site in kitchen
7.2 Delivery to customers:Eating area and will deliver foods to households
7.3 Payment methods and terms:online payment (just eat) take cash and debit/credit cards
7.4 Suppliers:
Name and location of supplier
Items required
Payment arrangements
Reasons for choosing supplier
All purchased through own
Economical prices, short
funds. Purchased from eBay
delivery and at good quality.
and prices
Patel cash and carry, Wembley
Cooking equipment
Delivery vehicle
and Amazon at discount prices.
Premises
Premises leased for 10 years at

2,000 pcm
Furniture
7.5 Premises:
Where are you going t operate from
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7.6 Equipment:
If being bought
Item require
Already owned?
New or second hand?
Hot counter
Purchased from
New
Yes
Price
430.80
New
Commercial Suppliers
45.00
, Microwave
New
340.00
Fridge
7.7 Transport:
Delivery Van
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7.8 Legal requirements
Food hygiene, health and safety, PAYE,
Public liability.
7.9 Insurance requirements:
Public liability
7.10 Management and staff
My Husband is the owner and I am the manager
And I have one staff member.
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Task 1 Understand the sources of finance available to a business
This tasks offers you an opportunity to achieve L.O1: 1.1, 1.2, 1.3 and M2
You have been asked to identify a range of sources of finance available to the organisation
outlined in the Shaping Your Future section. These can include raising funds through a
combination of finance areas. Please identify at least three sources (1.1).
Assess the implications of your choices: What are the legal, financial and dilution of control
implications and other risks involved? (1.2)
After assessing the possible sources of finance, you must chose a source(s) that would be
appropriate for the organisation outlined in the Shaping Your Future section. (1.3)
Guidelines:
You are required to:
Evaluate the benefits of the different sources for the organisation outlined in the Shaping
Your Future;
Match the term of finance to period of project
M2:
To achieve M2, In a report format, assess the reasons why the other sources of finance would be
considered inferior to the ones selected in 1.3. Justify your position, explaining why you have
arrived at your conclusions with reference to the organisation outlined in the Shaping Your
Future future plans.
Present your answer in a report format.
Interim Completion date : 15th May 2015
Word Count: 500 words approx.

NB: When the question refers to an organisation, the learners will need to discuss their
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organisation as detailed in the Shaping Your Future section above OR the organisation from the
designated list held and approved by Student Support.
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Task 2 Understand the importance of financial planning and information needs.
This tasks offers you an opportunity to achieve LO2: 2.1, 2.2, 2.3,2.4 and D2
Analyse the financial costs of your chosen sources of finance for the organisation outlined in
the Shaping Your Future section. (2.1)
Using a report format and with reference to the activity of financial planning, you will need to
explain why financial planning is important for the success of the organisation outlined in the
Shaping Your Future section? (2.2)
Assess different information needs for each decision maker within the organisation outlined in
the Shaping Your Future section. Identify and assess the information that is needed for a range of
decision makers. (2.3)
Explain how a bank loan and investments (issue of ordinary shares) impacts the balance sheet
and income statement (2.4)
D2:
To achieve D2, Use the draft balance sheet below. Please note that the balance sheet does not
balance. Include a recent loan of 7,000 which will be paid back in 3 years time with a fixed charge
of 1500 per year payable at year end. Show all your calculations that enable the financial report
below to balance.
Assets
Fixed Assets
Accumulated Depreciation
Total Fixed Assets
10000
1000
9000
Current Assets
Stock
Debtors
Bank
Total Current Assets
2500
1500
12500
16500
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Total Assets
Liabilities
Creditors
Loan
Credit card
Total Liabilities
Total Assets - Liabilities
Equity
Capital
Retained Profit
Total Equity
25,500
3000
2000
750
5750
19750
2000
16250
18250
Interim Completion date : 29th May 2015

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Task 3: Be able to make financial decisions based on financial information
This tasks offers you an opportunity to achieve LO3: 3.1, 3.2, 3.3,M3 and D1
Task 3a. Analyse budgets and make appropriate decisions:
The CEO of the organisation outlined in the Shaping Your Future section has asked you to
prepare a Cash Budget for the four months ending October 2015, and identify whether the
business has a surplus or a deficit. If the organisation outlined in the Shaping Your Future has a
surplus, suggest two ways in which it could utilise this and if it has a deficit, suggest two ways it
could deal with this. (3.1)
The CEO of the organisation outlined in the Shaping Your Future has asked you to prepare the
Cash Budget based on the following information:
The Bank Balance on 1st July2015 will be 50,000.
2.
Total monthly sales for the four month period ending October2015 are forecasted as:
July
150,000
August
100,000
Sept
125,000
October
3.
120,000
Cash purchases during the relevant period are:
July
52,000
August
32,000
Sept
74,000
October
82,000
4.
A new supplier has offered the organisation outlined in the Shaping Your Future section
two months credit starting in July 2015; this means that materials bought on credit in July will be
paid for in September and so on. The organisation outlined in the Shaping Your Future section
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plan to make the following credit purchases from this supplier:
July
46,000
August
20,000
Sept
30,000
October
20,000
The organisation outlined in the Shaping Your Future section pays rent of 15,000 per month
quarterly in advance. Payments are due on 1st July, 1st October etc.
6.
Other expenses are forecasted as follows:
July
10,000
August
15,000
September
20,000
October
20,000
7.
The organisation outlined in the Shaping Your Future section is repaying a bank loan at
the rate of 10,000 per month. The last installment is due in September 2015.
Task 3b.
The organisation outlined in the Shaping Your Future section is considering selling high quality
luxury exercise equipment.
Its costs for 500 units are as follows:
Total Direct Cost
20,000
Fixed Cost
10,000
Total Cost
30,000
The organisation outlined in the Shaping Your Future section is currently reviewing its selling
prices and is considering cost-plus pricing based on:
Either a 33.33 % mark-up on cost price (i.e. profit is 33.33 per cent of cost price)
Or a 20 % return on capital employed.
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The organisation outlined in the Shaping Your Future section will choose the method that provides
the highest return.
The organisation outlined in the Shaping Your Future section has capital employed of 10,000.
Calculate the unit price based on both costing methods and select the price you think is most
appropriate. Explain why you think it is the appropriate price.
You may round up your figures to nearest 1 when calculating your answers. (3.2)
..
Task 3c.
The organisation outlined in the Shaping Your Future section has been presented with three new
product opportunities. You have been asked to identify which product the company should produce
and sell.
You need to use the Payback Period and Net Present Values (NPV) for each of the products.
Based on the table below, identify which new product (A, B or C) you would select for
manufacturing and selling by the organisation.
Yr.
0
1 Cash
Product A
Investment 50,000
20,000
Product B
Investment 50,000
23,750
Product C
Investment 50,000
20,000
Inflow
2 Cash
17,500
23,750
15,000
Inflow
3 Cash
25,000
23,750
12,500
Inflow
4 Cash
32,500
23,750
25,000
Inflow
Total
95,000
95,000
72,500
The estimated cost of capital is 10% per annum.

Note The discount factors are as follows:
Year 1 = 0.909
Year 2 = 0.826
Year 3 = 0.751
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Year 4 = 0.683
To assist the organisation outlined in the Shaping Your Future section in making a decision, you
are required to calculate the following for each of the three projects. (3.3)
Payback period
The accounting rate of return(ARR)
The net present value (NPV)
M3:
To achieve M3, you will identify the individual needs of the stakeholders in The organisation
outlined in the Shaping Your Future section. This will be presented in a suitable business format
(a report or a formal letter) or a comparison table and will include business terminology accurately.
D1:
To achieve D1This question relates to 3.3.
Justify the use of investment appraisal techniques and other financial planning methods in the
process of strategic investment decision making for a business.
Interim Completion Date: 5 June 2015
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Task 4: Be able to evaluate the financial performance of a business
This tasks offers you an opportunity to achieve LO4: 4.1, 4.2, 4.3, M1& D.3
You have been tasked to prepare a report for the Managing Directors of your organisation outlined
in the Shaping Your Future section. They will attend the British Investment Group Head Office to
meet with key decision makers in the venture capitalist department. They have asked you to
provide them with an explanation of the purpose of the Trading Profit and Loss Account or Income
Statements and the Balance Sheet. How would the capital appear in the balance sheet and the
income statement for the organisation outlined in the Shaping Your Future section? (4.1)
Compare appropriate formats for financial statements for different business organisations. That is,
compare the balance sheet formats and also compare the income statements/profits and loss
accounts formats. (4.2)
ABC Ltd runs a chain of small shops and you have just received the following extracts from the
audited accounts for the period ending 30 th September 2013.
PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 30th SEPT 2013
000
Sales
000
800
Cost of goods sold
(150)
Gross Profit
650
Wages
400
Other Expenses
20
(420)
Net Profit
230
STATEMENT OF FINANCIAL POSITION AS AT 30 SEPT 2013 (Balance Sheet)

000
Fixed Assets
000
650
Current Assets
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Stock
300
Debtors
100
Bank
280
680
Total Assets
1330
Financed by:
Equity and Liabilities
Share Capital
500
+Net Profit
230
Total equity capital
730
Non-Current Liabilities
150
Current Liabilities
Creditors
450
Total Equity and Liabilities
1330
Required:
(a)
Calculate the following accounting ratios for ABC Ltd:
Current ratio
Acid test ratio
Return on capital employed (ROCE)
Gross profit margin
Net profit margin
For each ratio, include the formula in words together with your workings, and explain what each
ratio measures. (4.3)
M1:
To achieve M1, you are required to match the above ratios (i.e., current ratio, ROCE etc.) to the
following interested parties; suppliers, investors and competitors. Provide clear justification for your
answer.
D3:
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To achieve D3, explain the differences (and the importance of this differentiation) between:
I
Current and acid test ratios
ii.
Gross profit and net profit

Interim Completion date : 27th June 2015
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Task 1 (L.O. 1: 1.1, 1.2, 1.3, 1.4, & M1)
1.1 Sources of Finance There are a number of sources of finance available to an organization, which
could be internal, or external and short term or long term. However, when deciding what source to be
used for particular business, various factors need to be taken into consideration based on the
requirement of the business. These factors can be identified as, ownership, gearing, cost, time
period for which the finance is required. Mainly financial source can be divided in two.
Equity finance
Debt finance
Furthermore hire purchase; lease and credit factoring can be identified as other means of finance.
These sources are called other source of finance.
Equity finance refers to exchanging a share of the ownership of the business for a financial
investment in the business. Debt financing involves borrowing funds from creditors with the
agreement to settle the borrowed funds plus interest at a specified future time. When it comes to
our business, sources of finance available are explained as follows,
Our own savings as capitals
An aspiring restaurateur, if you have personal savings, investments or equity in your home, this may
be the best approach to financing a new business venture. The use of personal assets helps
entrepreneurs avoid applying for a loan and taking on debt for a new business. Loan interest
payments also affect the bottom line and can delay profitability. Loans will also need to be repaid if a
business fails in order for the owner to retain good credit. Inviting investors can dilute business
ownership and affect the freedom of the business owner to make independent decisions. Also,
should a business fail, all investors should be made whole if an entrepreneur should ever want to call
upon the investors again for financing.
Use of home equity line of creditors
If an entrepreneur does not have personal assets to fund a new business, they may turn to family
and friends to receive start-up funding. Expectations need to be set with respect to the type of
investment, for example, a loan or an ownership stake, and the specific terms of any
arrangement. It is wise to seek professional legal counsel and forge a written agreement when
entering into business arrangements with family and friends. Written agreements set out all terms up
front and help avoid misunderstandings and hard feelings later on. This could be considered as
another option for us.
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Bank loan (Small business loan)
These are the loans offered by banks to businesses where the interest is generally lower than
the overdraft rates. This is the most popular source of financing and could vary from medium to
long-term. Term loans are usually repaid in monthly instalments and may require providing
security to obtain a loan. Partners and Angel Investors Entrepreneurs can always seek out
either business or investment partners to both share in the burden of financing, and take an
active role in management of their business. When entering into any partnership, it is always wise
to document the roles and responsibilities of the individual partners, as well as the division of
investment proceeds or losses. It is best to consult with an attorney to establish a partnership
agreement or similar legal business form.
Bank Overdraft
This is a temporary facility attached to the firms current account allowing going beyond the
actual account balance. This facility is particularly important when the firm has regular sales
and purchases which sometimes lead the firm in cash deficit situations where the overdraft
work as a back up and allows the firm to pay important bills.
Trade Credit
Suppliers of goods or services often do not require the firm to make payments immediately.
Instead they offer credit terms where the firm can settle its dues at a later date. Terms may run
from 30 to 90 days and by allowing the firm to delay its settlements, trading
companies effectively finance the firm for a short term.
1.2 Implications of source of finance
The contemplated Italian restaurant business will be registered as a privet limited company.
Therefore the liability of the shareholders will only be limited up to the paid up share capital. Since
this will be registered as a privet limited company, the company will not be able to raise finance
through bonds or issuing shares to the general public.
Our own savings

As capitalise of our own money refers to capital invested in a business by its owner. Personal
money is a primary source in the finance. Own financing consists of the cash and any personal
assets adaptable into cash or simply converted to business use. Using own money creates no
obligation to repay investors. But raising equity capital would lead in the diluted ownership if
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43

equity is raised through outsiders.
Use of home equity line of creditors
Home equity lines of credit are loans that financial institutions give homeowners based on how
much equity they have in their home, the value of their home and their current mortgage. The
reason for using a home equity loan, immediate access to fund, interest rates on home equity
lines of credit are typically variable and easy to monitor their interest rate. Even though this
method of finance does not lead to dilution of ownership, it creates a liability to make periodic
interest payments and pay back the capital at the maturity to the creditors.
Bank loan (Small business loan)
a bank loan can consider for short term and long term. Short term loan normally, for less than
one year, short term loans are used to manage the working capital. Long term loan normally
uses for managing financial performance or to buy some equipment. The purpose of using
bank loan can access to more money than you might have the savings. However the firm may
be required to provide security against the loan most of the time, fixed interest should be paid
irrespective of the firm is profitable or not and unlike in an overdraft facility firm needs to pay
for the full amount of the loan obtained even if they use it partially.
Trade Credit
Advantages of trade credit include, it does not involve cost and no security is required by the
supplier and improves the liquidity of the firm since the payment is not made immediately.
Disadvantages include, the firm needs to have a proven track record and delay of payments
may incur penalties, impacts on relationship with suppliers and reputation in the market
Bank Overdraft
Advantages of overdraft are, it can be quickly arranged and flexibly where the firm can use
when they need it and interest will be charged only for the limit used and if not used no interest
will be charged apart from the annual fee. However, it involves some disadvantages too, and
they are, it carries a higher interest rate than bank loans and if the firm goes beyond the
agreed limit firm will be charged with high extra charges and on the other hand overdraft may
require business assets to be secured against it
1.3 All the sources of finance discussed above have their own benefits. Use of own savings as capital
will increase the equity holding in the company, creates no obligation to pay periodic interest
payments and capital repayment; use of bank loans will reduce the cost of capital to the company
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since the cost of debt is lower than cost equity and it also will not lead to dilution of ownership; use of
trade creditors may not involve any cost and it would also improve the liquidity of the business as it
does not require immediate payment; and the advantages of using bank overdraft will include, easy
arrangement of the overdraft facility and the interest payment will only be limited to the amount
utilized out of the total facility where as in a loan the interest will be charged for the total loan
obtained. However, it should be noted that a business organization may not have the access to all
the sources of finance. The ability of a business to access finance may restrict by the factors such as
the size of the business, type of the organization, type of the fund requirement (long or short-term),
owners willingness to dilute the control etc. When it comes to our business, we will not have access
to funds raised through bonds or public placement of shares since it will be registered as a private
limited company. And on the other hand owners would be happy to retain total control of the business
by injecting equity using personal savings for the long term fund requirements such as
machinery, equipments and furniture required for the business. A term loan (2 to 5 years) will be
obtained to bridge any gap to meet long term finance requirements. On the other hand, initially a
bank overdraft will be used to meet working capital requirements (less than one year) of the
business, with the intention of obtaining trade credits from the suppliers once a sound relationship is
established with them.
M2
To: board of Director
From: Finance manager
Date: 02/07/2015
Subject: The important assess the different finance for a business needs.
The report explain for the business variety how obtains the finance needed
Business needs are very important for a company. We want to know how
Quickly the money is needed and the cheapest option available. The important to Know That there
is any risk involved in the reason for the cash and the length of time of requirement for the finance
And the other hand short term and long term fiance. It would less risky short term fianc for the
lenders
Long term finance is more risky for to lend money for small business .important to know which one
is the better finance for each others. Hope this is clarifies the how obtain to business variety finance
needs for.
If you need any for the clarification please do not hesitate to contact me.
P Fernando
Finance manager
Task 2 (LO2: 2.1, 2.2, 2.3, M2, D1 & D2)

II.1 Financial costs the cost of the term loan (cost of debt) is lower than the cost of equity, because firstly,
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debt isles risky from the debt holders view point. Secondly, in the event of liquidation the creditor
hierarchy dictates the priority of claims. Finally interest is paid before dividend payments to shareholders.
However, obtaining a loan may require the company to provide some security and involve administration
cost as well. On the other hand company will have to repay the loan onetime and delays of defaults may
result in late payment charges and huge penalties. Since we are planning to inject our own savings as
equity, the dividends will only be paid when the business makes sufficient profits. Therefore the cost of
equity is not a major concern. Our short term finance requirements will be met through a bank overdraft.
The cost of bank overdraft will be the interest cost to the company. However, unlike loans, the interest
will only be paid for the overdraft amount utilized, whereas in the case of a loan the interest will be paid
for the total amount the loan obtained. Ideally the cost of trade creditors is nil. Therefore, this source of
financing will have no cost tithe company, unless otherwise the creditors are not settled on time and
payments are defaulted which will incur interest and/ or penalty
There are many types financial costs can occur from using personal saving.
Capital :As well as from borrowing bank and other sources
Dividend payments
Limited ability to respond to invest opportunity: opportunity cost
Interest charge: must pay the additional cost like interest
Risk: sunk cost(1,research & development cost 2,Insurance)
2.2
To : Board of the directors
From : Accountant
Date : 3rd July 2015
Subject: The importance of financial planning for the success of the organization.
This report explains the importance of financial planning for the success of the company.
Financial planning is very important for every company. A good business plan provides a guide for the overall
operation of the business and the way finances will be handled within a business. Financial plan helps to
achieve short term and long term financial goals and create the balance plan to meet those goals. Also Financial
planning provides meaning and direction to your financial choices. By clearly identifying and prioritizing
personal financial goals.
The importance of financial planning for business is best seen when a company is faced with a situation
concerning outstanding debts and rising cost. So to be able to be prepared for the situation in advance, the
company should have prepared a proper financial plan before hand. The success of a business is greatly
determined by the financial plans they have laid out and how well it is followed.
Hope this clarifies the important financial planning to an organization. If you need any for the clarification,
please do not hesitate to contact me.
Priyanthi Fernando
Accountant.
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2.3. Different information needs for each decision maker within the organization
There are three different levels at which the decisions are made in an organization. They are Strategic decisions,
tactical decisions and operational decisions. Therefore the information required at these levels varies in order to
make effective and informed decisions.
Strategic decisions are long term in their impact. They usually affect and shape the direction of the entire
business and are usually made by the senior managers. For an example, senior management in a restaurant
needs to make the strategic decision of retaining or selling off a business unit. Therefore the information
required to make this decision would be, long term turnover/ sales of the particular business unit against the
likely market conditions.
Tactical decisions deal with implementing strategies of the organization and generally made by the middle
management. Strategic decision of a restaurant business may be, whether to open the restaurant early and close
late. Middle management would require information on likely customer numbers to make the decision of
opening the restaurant for longer.
The decisions made relating to day to day running of the business are called operational decisions and the
responsibility of making these decisions lies with the middle or junior managers. For example, the decision to
order more chicken than pork for next week in a restaurant is made by the junior management. They would
require information on the stock and the weekly sales of the restaurant.
Therefore it is utmost important that the correct and suitable information are received by the managers at
different levels in order to make the decision making process an effective and efficient one.
.
2.4 How a bank loan and investments (issue of ordinary shares) impacts the balance sheet and
income statement Using of bank loan can affect to the income statement and balance sheet of the
company. Bank loan interest paid is accounted under the financial cost in the income statement. The
amount of bank loan is accounted under long term liability in the balance sheet. Also amount of cash
is accounted under cash and cash exultance in the financial statement.
Amount of bank loan
Cash account
dr
Bank loan account cr

Interest paid
Interest paid account
Cash account
dr
cr
Issue of ordinary share affects to income statement and balance sheet. The amount of equity
is
accounted under equity category in the balance sheet. Dividend payment is accounted under other
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Assets
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of Science & Technology
cost category in the income statement.
Fixed Assets
10000
Accumulated Depreciation
1000
Total Fixed Assets
9000
Amount of ordinary share

Cash account
dr
Equity capital account

Dividend paid
Dividend paid account
Cash account
Current Assets
Stock
2500
Debtors
1500
Bank
12500
Cash(Loan Received)
7000
Total Current Assets
16500
Total Assets
25.500
cr
dr
cr
D2,
Liabilities
Creditors
3000
Loan
2000
Credit card
750
Loan payable
1500
Loan term Liability
7000
Total Liabilities
7250
Total Liabilities (18250+7250)
25500
Equity
18250
Capital
2000
Retained profit
16250
Total equity
18250
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.
Level 4
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Task 3 (LO3: 3.1, 3.2, 3.3, & M3)
TASK
3A:Cash
Budget
AUGUS
OCTOMB
JULY
SEPT
Opening
50,00
83,00
126,0
Balance
0
150,0
0
100,0
00
125,0
101,000
00
00
00
120,000
150,0
100,0
125,0
00
00
00
52,00
32,00
74,00
0
46,00
82,000
10,00
0
10,00
20,000
10,00
bank loan
Other
0
10,00
0
15,00
0
20,00
expenses
0
45,00
rent
total
0
117,00
57,00
150,0
payments
closing
0
83,00
0
126,0
00
101,0
167,000
00
00
54,000
cash sale
Credit sale
total receipt
payments
cash
purchases
Credit
purchase
balance
ER
TOTAL
495,00
120,000
20,000
45,000
491,00
0
Opening balance + Total receipt-Total payments=Closing balance

50,000+495,000-491,000=54,000
TASK 3B
A,
Fixed cost
10000
Total
Direct
Level 4
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Task 4 (LO4: 4.1, 4.2, 4.3, & D.3)
Task 4.1
The purpose of main financial statements
There are three major financial statements,
1, The balance sheet:
In a certain period a corporation's possessions, stockholders' fairness, and liabilities are reported
in to balance sheet.
2, The income statement:
In a phase of time a corporation's revenues and common expenditures are stated such as a year,
month, quarter, 52 weeks, 13 weeks, etc.
3, The Cash flow statement:
During the same phase of time as the income statement correct in a corporations cash and
Cash counterparts are accounted in to the cash flow.
The mainly certified accounting principles GAAP the money related articulations required to be
equipped that are distributed outer of a company. For instance, the cost principle typically needs
that the balance sheet must report long-standing resources at cost minus composed reduction. The
corresponding principle want that the cost of long-standing possessions used in the business are
allocated to different accounting periods in which they manufacture revenues which are used on.
Task 4.2
Financial statement for Different types of business
There are three type of financial statements
Income Statements:
Income statements states income first then expenses. By reduce expenses from revenue net income
is considered. It is the most basic income statements and most providers use this method. Income
statement for an industrial or retail store operation is more difficult. The first line of the income
statement is for income or gross income, followed by subtraction of cost of industrial or goods sold.
This provides a gross income amount. The second section is lists of all expenses include managerial
or general costs, selling. Operation income is calculated by subtracting all expenses from gross
income. The last section subtracts any other expenses, taxes, interest expense to enter at the net
income of the corporate.
Balance Sheet:
That shows the stockholders equity, liabilities and assets of the corporate. The total assets are equal
to total stockholders equity and liabilities.
The first area is lists of all assets as follows:
Equipment, Real estate, Investments, Cash and Other business holdings
The second area is list of all as follows:
Obligations includes any loans or account payable
The third area is:
Stakeholders equity.
This balance sheet is suitable for small business. The business frequently divides it to present and
long haul resources and liabilities.
Level 4
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Cash flow Statement:
The statement of cash flows is one of the main financial statements. The other financial
statements are
The balance sheet,
Income statement,
Statement of stockholders equity.
The cash flow statement note the cash generated and used during the time interval specified
in that description. The period of time that the statement covers is chosen by the company.
TASK 4.3
Current ratio
The current ratio is the ratio of current assets to current liability. The current ratio is a commonly
used liquidity ratio that measures a company's ability to pay its current liabilities with its current assets.
Current ratio = Current assets/ Current liability
According to this organization, current ratio can be calculated as follows.
Current ratio = 680/450
= 1.51
Acid ratio
An indicator of a companys short-term liquidity. The quick ratio measures a companys ability to meet its
short-term obligations with its most liquid assets.
Acid ratio = Current asset- inventory/ Current liability
According to this organization, current ration can be calculated as follows.
Acid ratio = 680-300/450
= 0.84
Return on capital employed
This ratio indicates the company efficiency of long term equity. ROCE shows how well a company is using
both its equity and debt to generate a return.
ROCE = Profit before interest and tax (PBIT) / Net assets (Total assets- current liability) * 100
According to this organization ROCE ratio can be calculated as follows.
ROCE = (230/ 880) * 100
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= 26%
Gross profit margin
A financial metric used to assess a firm's financial health by revealing the proportion of money left over from
revenues after accounting for the cost of goods sold.
Gross profit margin = (gross profit/ sales) *100
According to this ABC Ltd gross profit can be calculated as follows.
Gross profit = (650/800) * 100
= 81.25%
Net profit margin
The ratio of net profits to revenues for a company or business segment - typically expressed as a percentage.
Net profit = (Net profit/ Sales) * 100
According to this ABC Ltd net profit can be calculated as follows.
Net profit = (230/800) *100
= 28.75%
ROCE is a main profitability ratio of the business. This shows how efficiently the capital has been used within
the organization. ROCE is 26% of ABC and this shows that the overall profitability is at a very good level.
Two other important profitability ratios are gross profit and net profit ratio, which are 81% and 28.75%
respectively for ABC Ltd. The huge difference between these two ratios (81% and 28.75%) is due to huge
wages cost of 400 pounds.
The ideal current ratio should be 2:1 and the ideal acid ratio should be 1:1. However, these two ratios
respectively, for ABC are 1.51 which shows that company only 1.51 pounds of current assets to cover 1 pound
current liability; and 1: 0.84 which shows that ABC has only 0.84 pounds of quick assets to cover 1 pound of
current liability.
The difference between current ratio and acid ratio is, current ratio takes total current asset into consideration
while the quick ratio only take quick assets (inventory and prepayment are deducted from total current assets)
into consideration.
The above ratios show that company has a very high profitability level and insufficient liquidity level. This
implies that the management of the company has used current assets to for their long term 8investment in order
to make higher profit. However, it is advisable for the company to strike a balance between the profitability and
liquidity. Because the investors not only are interested in the profitability, but also the liquidity as well, because
they would require to the company to pay the return of their investments in firm of interest and dividend, for
that for the company should have sufficient cash. Furthermore the employees of the organization would also be
interested in the liquidity level of the company, because they would require for timely payment of their salaries.
Level 4
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D3
1. Current and acid test ratio
The difference between the current ratio and the acid test ratio commonly connect the current
assets inventory, prepaid expenses, and some deferred income taxes.
The current ratio benefits the total amount of all of the current assets. The acid test ratio benefits
only the following current assets, which are treated to be quick assets: cash and cash equivalents,
short-term marketable securities, and accounts receivable is the other words, the acid test ratio
excludes inventory which is a mementos current asset for retailers and manufacturers, some other
amounts such as prepaid expenses and deferred income taxes are classified as current assets.
The current ratio is 2 to 1 (or 2:1) calculated as: total current assets of 40.00 divided by the total
current liabilities of 20.00
2. Gross profit and net profit
Gross profit margin and Net profit margin are two independent profitability ratios benefit to assess a
company's financial stability and overall form. Profit margin is a percentage measurement of profit
that expresses the amount a company earns per pound of sales. Apparently, if a company produce
more money per sale, it is a higher profit margin.
The gross profit margin it shows total revenue less the cost of goods .A amount it cost the company
to produce the goods or services that it sold, usually referred to as cost of goods sold. The
calculation to arrive at gross profit margin is as follows:
Gross profit margin = (revenue - cost of goods) / revenue
The net profit margin is a more accurate measure of a company's profitability, as it reveals the
percentage of revenue that actually reflects a company's profit per pound of sales. Net profitability is
an important distinction, since increases in revenue do not necessarily translate into actual increased
profitability. Net profit is the gross profit minus operating expenses and all other expenses, such as
taxes and interest paid on debt. The formula for net profit margin is as follows:
Net profit margin = (revenue - cost of goods - operating expenses -other expenses - interest Unit 2: Managing Financial Resources and Decisions
Level 4
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taxes) / revenue
IMPORTANT
CHECK THAT YOUR ANSWERS MEET THE CRITERIA
COMPLETE THE ASSIGNMENT CRITERIA AS YOU
GO ALONG
DO NOT LEAVE THINGS TO THE LAST MINUTE
Level 4
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55

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Assignment front sheet

1st May 2015

3rd July 2015 before 12:00 midday

Analyse budgets and make appropriate

make pricing decisions using relevant

Unit 2: Managing Financial Resources and Decisions Level 4 May 2014

London School of Science & Technology

investment appraisal techniques.

Discuss the main financial statements.

Compare appropriate formats of

financial statements for different types of

appropriate ratios and comparisons,

Review the mitigating circumstances policy for information relating to extensions.

The file size must not exceed 20MB.

Your work must be original with the appropriate referencing

Unit 2: Managing Financial Resources and Decisions Level 4 May 2014

London School of Science & Technology

find appropriate solutions

current ratio, ROCE etc.) to the

investors and competitors. Pro

A range of sources of information

appropriate methods / techniques

have been used.

other sources of finance would

selected in 1.3. Justify your po

at your conclusions with referen

Shaping Your Future future p

The appropriate structure and

approach has been used.

stakeholders in The organisatio

section. This will be presented

a formal letter) or a comparison

terminology accurately. (Task 3

Conclusions have been arrived at

investment appraisal technique

in the process of strategic inves

managing and organising activities has been recognised and

that the balance sheet does no

1500 per year payable at year

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enable the financial report belo

Effective thinking has taken place

D3: To achieve D3, explain the

/lateral / creative thinking

Gross profit and net profit (Task

Unit 2:Managing Financial Resources and Decisions ; Level : 4

BTEC Level 5 HND Diploma in Business

1st May 2015

3rd July 2015 before 12.00 midday

Future- A Vocational Scenario

Purpose of this assignment

London School of Science & Technology

Shaping Your Future

Unit 2: Managing Financial Resources and Decisions Level 4 May 2014

London School of Science & Technology

London School of Science & Technology

Details of future training courses you or your team want to

2.2 Describe the different types of product/service you are going to be

Unit 2: Managing Financial Resources and Decisions Level 4 May 2014

London School of Science & Technology

3.3 Where are your customers based?

3.5 Have you sold products/services to customers already?

If you answered yes, give details:

Anjelica's Managing Financial Decisions Final Latest

Anjelica's Managing Financial Decisions Final Latest