MANAGING FINANCIAL RESOURCES AND DECISIONS

Table of Contents
Task 1 ...................................................................................................................................................... 3
1.1 Evaluating all the possible sources of finance that would be available to ACME to finance the
project in UAE .................................................................................................................................... 3
1.2 Assessing the implications of the different sources of finance ..................................................... 4
1.3 Evaluating all the appropriate sources of finance for a business project ...................................... 5
Task 2 ...................................................................................................................................................... 5
2.2 Explaining the importance of good financial planning ................................................................. 6
2.3 Assessing the information needs of different decision makers ..................................................... 8
Task 3 ...................................................................................................................................................... 8
3.1 The importance of organizational practice of creating and analyzing a Sales and Production
Budget ................................................................................................................................................. 8
3.2 Calculation of Unit cost and to develop pricing decisions ......................................................... 10
3.3 Analyse the viability of the projects ........................................................................................... 10
Task 4 .................................................................................................................................................... 11
4.1 Main Financial statements .......................................................................................................... 11
4.2 Financial statement formats for different types of business........................................................ 11
4.3 Interpret the financial position by the ratios ............................................................................... 11
References ............................................................................................................................................ 13
Task 1:

1.1 Evaluating all the possible sources of finance that would be available to ACME to
finance the project in UAE
Bank Loans

In order to get an extra loan, a business can apply for a line of credit from the bank or other or
other money related organization. A credit is a whole of cash loaned for a given timeframe.
Reimbursement is made with intrigue. The moneylender of cash has to know all the business
openings and dangers included and will thusly need to see a point by point strategy for
success (Avlonitis and Indounas, 2007). The bank may likewise need some type of security
ought to the business keep running into money related trouble, and may in this manner like to
give a secured advance. Another method for raising here and now fund is through an
overdraft office with a bank. The borrower is offered authorization to take out more from
their record than they have put in. The bank settles a most extreme cutoff for the overdraft.
Intrigue is charged on the overdraft day by day. Banks resemble the store of obligation
financing. According to Bessant and Tidd (2007), bank gives short-, mid-or long haul
financing, and it can take back all advantage needs, including working capital, hardware and
land. The loans from the bank can produce enough income to cover the intrigue installments
which, are assessment deductible and restore the primary.

Banks need confirmation of reimbursement by requiring individual certifications and even a

secured premium, (for example, a home loan) on individual resources (Dahan et al. 2010).
Not at all like other financing connections, banks offer some adaptability. It is also able to
pay off the advance early and end the understanding. VCs and other institutional financial
specialists may not be so agreeable.

Venture Capital

A further method for raising assets that has turned out to be prominent is through investment.
Shipper banks and venture authorities might give fund to a promising and quickly developing
littler business. This as a rule includes a bundle that is a blend of offer and advance capital.
The chosen organizations named ACME, may likewise meet all requirements for awards
(Dixon and Griffiths, 2007). Government (or EU) help and subsidizing is some of the time
made accessible to organizations that meet certain conditions. For instance, concedes and
advances might be accessible to firms setting up in provincial zones or where there is high
unemployment. Considering the view of Karim (2009), another basic route in which firms
can back their business in the here and now is through exchange credit. In business it is basic
practice to buy things and pay for them later. The provider will ordinarily send the buyer an
announcement toward the finish of every month saying what amount is owed. The purchaser
is then given a timeframe in which to pay.

1.2 Assessing the implications of the different sources of finance

Implications of Bank Loans

A bank loans money to a business in light of the estimation of the business and its apparent
capacity to benefit the advance by making installments on time and in full. Banks don't take
any possession position in organizations. According to Fitzpatrick et al. (2015), bank work
force likewise don't get included in any part of maintaining a business to which a bank allows
an advance. Once a business borrower has paid off a credit, there is no more commitment to
or contribution with the bank moneylender unless the borrower wishes to take out an ensuing
advance. In adding to this Jeter and Brannon (2015) added that tax and Financial Planning is
the main advantages of taking bank loans. The interests on business bank credits is tax-
deductible. Furthermore, particularly with settled rate credits, in which the financing cost
does not change over the span of an advance, advance adjusting installments continue as
before for the duration of the life of the advance. Thus, this makes it simple for organizations
to spending plan and plan for month to month credit installments (McLeod, 2008).
Regardless of the possibility that the advance is a movable rate credit, entrepreneurs can
utilize a straightforward spreadsheet to register future installments in case of an adjustment in
rates.

Implications of Venture Capital

The implications of venture capital helps to increse the business expertise to execute the
project operations. It has been viewed that the financial support, gaining venture capital
financing can offer a start-up business with a valued source of supervision and discussion. As
per the view of Pries (2010), this can assists with an assortment of business choices,
including money related administration and human asset administration. Settling on better
choices in these key territories can be fundamentally imperative as the business develops. On
the other hand, additional resources like legal, tax, etc can also be solved with the help of
venture capital. It has been observed that a VC firm is able to deliver an active support at a
key stage in the growth of a start-up business unit. In this regards, Bessant and Tidd
(2007) mentioned that the faster growth and a greater success are two potential key benefits
for the strt-up firms. Moreover, venture capitalists are usually well associated in the business
community for tapping the connections between the busniess entities to get a remarkable
benefits.

1.3 Evaluating all the appropriate sources of finance for a business project
Venture Capital

Venture Capital to financing that originates from organizations or people in the matter of
putting resources into youthful, secretly held organizations. It give money to start-up
organizations in return for a possession offer of the business. Investment firms ordinarily do
not have any desire to take an interest in the underlying financing of a business unless the
organization has administration with a demonstrated reputation (Dahan et al. 2010). For the
most part, it like to put resources into organizations that have gotten significant value
ventures from the founders and are as of now profitable. As per the view of Avlonitis and
Indounas (2007), the venture capitalist additionally favor organizations that have an upper
hand or a solid strategic offer as a patent, a demonstrated interest for the item, or an
exceptionally extraordinary (and protectable) thought. Funding speculators frequently adopt a
hands-on strategy to their ventures, requiring portrayal on the top managerial staff and once
in a while the enlisting of supervisors. Funding financial specialists can give significant
guidance and business exhortation. The management are always searching for significant
profits for the speculations and the goals might be experiencing some miscommunication
with those of the organizers (Karim, 2009). The capitalists are regularly centered around here
and now pick up. Funding firms are typically centered around making a speculation
arrangement of organizations with high-development potential bringing about high rates of
profits. These organizations are frequently high-hazard ventures.

Task 2:

As per the shown table, in debt option 1, the cost of debt would be 6% and in debt option 2,
the cost of debt is 5%. Thus, it may be stated that, by using the debt option 2, ACME may
easily fulfill the requirement of finance of US$ 175 million within the stipulaed time frame.
Since the cost of debt is lower for ACME so it may also accomplish its desired investment of
US$ 50 million within a mentioned time frame. However, to do so, the varied sources of
finances available with the organization are equity policy, investment and many others. In
contrary, if the management of ACME uses any other debt option rather than 2, then it would
create problems and its desired investment rate may not get accomplished in the specified
time. So, the option with cost of debt with 5% is the most suitable option for ACME.

2.2 Explaining the importance of good financial planning

The main importace of having a good financial planning is to facilitate the collection of
optimum funds. The financial planning arranges the exact necessity of assets which intends to
stay away from wastage and over-capitalization circumstance. According to the view of
McLeod (2008), a good financial planning can help to fix the most appropriate capital
structure. It is known to all that funds can be arranged from different sources and can be
utilized for long term, medium term and here and now (Jeter and Brannon, 2015). Thus
financial planning is important for tapping fitting sources at proper time as long term assets
are for the most part contributed by shareholders and debenture holders, medium term by
budgetary establishments and now by the business banks. It has been viewed that the
financial planning can help the opeartional activities depending on the financial decision to
ensure the smooth flow of investment and smooth operational activities of manufacturing and
distribution. Therefore, this types of planning helps ACME to establish a sustainable position
in the target market.

In order to acheive success and to earn gains by means of the availability of assets, it is
important and effective to arrange finances. Greenhood (2010) descibed that by means of
good financial planning,the expenditures are shaped accurately and controlled and maintained
by experts. In case, a perfect and proper plan could be augmented in an advance mode, each
and every judgements regarding the financial matters could be administered.Financial
planning is a method where in order to achieve the aims and objectives, the current financial
condition and the adjustments regarding the spending patterns represents infront of a human
being, a country and an enterprise. The importance regarding financial planning is described
as follows- Cash flow, investment, income, capital and family security.

 Cash Flow-Blueshorefinancialplanning.com (2017) suggested that in order to

enhance cash flow and to supervise and verify cash flow financial planning is useful
for spending. By taking into considerations, the cash flow is enhanced such as careful
expenditure, reasonable budget and tax plan.
 Investment- An effective financial plan provides the facilities regarding an
appropriate plan that emphasizes the revenue earnings as well as expenditures of a
 human being. It benefits a human being regarding achieving and fulfilling of desired
aims.
 Income- By means of planning, it is suitable to maintain as well as control revenues
effectively and in a smoother way.In order to seperate revenues in terms of tax
payments, administrating regarding yearly and monthly saving costs and expenditures
have become useful and fruitful.
 Capital- With the assistance and availability regarding corporate financial planning, a
powerful principal amount foundation could be built and achieved.
 Family Security- Lee et. al. (2010) stated that according to the point of view
regarding family protection, financial planning is needfull and is the most necessary.
In order to secure any family in terms of financial matters and issues, different
strategies should be implemented in the market and also for serving purposes.
 Financial Understanding- Billingsley et. al. (2016) stated that a proper
understanding and realisation regarding financial issues, matters as well as resources
should be fulfilled when the financial objectives and aims are met. Therefore the
effects regarding judgements are realised properly and the outcomes are
verified.Thus, financial understanding should implement and introduce latest aspect in
terms of budget and in developing and maintaining of financial style.
 Savings- Rattiner (2010) stated that it would be fruitful and good in terms of
expenses along with high rigidity and lucidity. These expenditures could be usable
during the periods of learning purposes and in case of urgent and emergency
conditions.
 Assets- It is always very much effective in order to take a decision based on original
value of assets.Nowadays more assets arrives with liabilities linked with it.Talents
must be developed regarding introducing or elemination of liabilities which arrives
with the realisation and forebearing on assets.
 Standard of living of people- The amount of savings arised from a well developed
planning could become effective and useful during complicated times.
 Ongoing Advice- Building up and maintening of good rapport with an adviser of
finance is crucial in achieving aims and objectives if a proper faith is there. A
financial advisor would interact with a person in order to analyse the present financial
situations and create a comprehensive policy.
2.3 Assessing the information needs of different decision makers
Debilitating worldwide economy has represented another test for the development of the
worldwide steel industry and the Gulf Region is no exemption. Fitzpatrick et al. (2015)
mentioned that a current examination by the Organization of Economic Co-operation and
Development (OECD) said that the world monetary viewpoint has debilitated as of late.
Rising showcase economies have encountered promote log jams in development, which is
weighing on worldwide modern generation and exchange. In the progressed economies,
speculation and efficiency development are curbed. The OECD's most recent Economic
Outlook estimates the world (GDP) development to stay humble in the coming years, in spite
of a continuous change from 2.9% in 2015 to 3.3% in 2016 and 3.6% in 2017
(www.steelworld.com, 2017). In this way, steel utilization advancements have been negative
for a few real steel-devouring economies over the span of 2015. In October, the World Steel
Association brought down its estimates for world steel request in 2015 and 2016. Worldwide
evident wrapped up steel utilize is currently anticipated to decay by 1.7% in 2015, preceding
expanding unassumingly by 0.7% in 2016 (www.steelworld.com, 2017). More than $3
trillion worth of end client ventures has been recorded in the Mena (Middle East and North
America) area up to 2016. In the GCC, governments are advancing industrialisation programs
in the particular nations gone for getting to be confident to the degree where it is conceivable
to diminish imports reliance, to produce other origins of wage (www.steelworld.com, 2017).

Task 3:

3.1 The importance of organizational practice of creating and analyzing a Sales and
Production Budget
Sales budget empowers the organizations to have a superior income and can deal with the
accounts successfully to burn through cash where required. This can enhance the benefit of
an organization and can oversee use profitably on different diverse parts of the organization,
for example, advertising, without suffering a loss (Dahan et al. 2010). In addition, a sales
budget is authoritative for the business division to empower and direct the funds of
consumption all the more adequately. The business office can in this manner figure out what
sum would be spent and what it could be spent on and what parts of the organization requires
to be planned.

Furthermore, a production budget grants an organization to track costs. The monetary

allowance for the most part contains a measure of what number of units the organization
needs to deliver. Considering the view of Pries (2010), the quantity of units delivered
depends on two components. The first is stock. A creation spending points of interest the
costs required to keep enough item close by to meet the stock prerequisites of the
organization. The second component is deals targets. The creation spending conjectures the
costs expected to take care of offers demand for its items. Adding to this, Jeter and Brannon
(2015) stated that a production budget enables the organization to estimate generation levels
for periods when request changes. On the off chance that an organization realizes that its
request, and creation levels, would be low in one month, it can utilize that downtime to
deliver additional item to have close by for an up and coming period when request spikes.
This enables the organization to abstain from being in a circumstance where it needs to
deliver a greater degree by assembling ability to meet the product demand.

Cash budget

Particulars January February March

Opening cash balance 5000 -7000 11000

Cash Sales 42000 45000 48000

Collection from debtors 30000 63000 67500

Total cash receipts 77000 101000 126500

Payments 84000 90000 96000

Closing cash balance -7000 11000 30500

Table 1: Cash Budget

(Source: Created by Author)

According to the cash budget analysis, the firm ACME experienced losses in the month of
January by closing cash balance US$ -7000. However, the analysis of February amd March
reflects that the firm has incured profit in the month of February and March by closing cash
balance respectively US$11000 and US$30500. Therefore, depending on the analysis it can
be inferred that the chosen company ACME can borrow funds from the bank in February and
March.
3.2 Calculation of Unit cost and to develop pricing decisions
The formula of unit cost is stated as: total production cost in the period divided by total
output in the period (units).

Figure 2: unit cost formula

As per the formula, the total production cost of ACME is inclusion of both fixed and variable
cost. The fixed cost of ACME is $20,000 and variable cost is $5 per unit. Therefore, the total
cost is $25,0000. The output of ACME is 15,000 units. Then the cost per unit is $0.06.
Therefore, in order to increase the market share and total sales of the products of ACME in
the market, the pricing need to be competitive in nature. This means lowest or affordable
pricing. So that, the total sales of ACME would get enhanced consistency. As a result, the
position and ranking of ACME might get augmented significnatly resulting in the
amplification of the prosperity in the market as compared to many others. Failure to do so,
might prove troubelsome and detrimental for ACME to retain its position and reputation in
the market among many others (Avlonitis and Indounas, 2007). And the customer base might
not get enhanced and it would result in disturbance for ACME in retaining its ranking in this
current scenario among others.

3.3 Analyse the viability of the projects

As per the fromula of payback period, the original cost of the project divided by annual cash
inflows. This states that, $23000 is the opening cash balance of ACME and the closing cash
or annual inflow is $34000. Therefore, the payback period comes out to be $ 0.6764. The Net
present value of the project would also be large and so the vaiability of the projects would be
extremely lower as per the appraisal techniques. Therefore, the cash inflows need to be
increased in every year so as to make the process more effective in all regards. Only then, the
demand and sales of the products of ACME would get amplified consistently in the coming
years as compared to previous age. And the appraisal policy would also become more
effective and accurate for the organization of ACME int he coming scenario among others
(Avlonitis and Indounas, 2007). In order to do so, the pricing decision need to be developed
as per the demand of the products so as to make it more profiable and productive in the
market.

Task 4

4.1 Main Financial statements

The key financial statements mentioned in the case are income statement, profit before tax
and profit after tax, equity and liabilities of the organization. Apart from this, current
liabilities of the project is also determined efficiently so as to analyse the position of the
organization in the market as compared to many others (Pries, 2010). On the other hand, the
figures also helps to present a detailed overview of the prices of the products that need to be
determined in order to increase the demand and sales. Only then, the profit margin and
productvity of the products of ACME would get boosted and the profitability and market
share would get amplified considerbaly among others.

4.2 Financial statement formats for different types of business

In case of sole proprietorship, income statement is offered highest improtance in order to
amplify its profit margin in the entire market among others. On the other hand, limited
liability company, profit before tax and profit after tax options are considered as one of the
most essential requirements. Without which, an organization may not function accurately. On
the other, PJSC and government organizations, equity and operating profit is extremely
essential in ordeer to craete a distinct impact in the market in the future (Pries, 2010). In case,
the prganization fails to do so, then it would present negtaive impacts over the brand value
and image of the firm in the coming age. Therefore, each and every option is offered highest
effect and impact.

4.3 Interpret the financial position by the ratios

As per the ratios, the position of the organization need to be improved since, the competition
is augmenting in a higher rate. In order to do so, the unit per sales and profit margin need to
be augmented. Only then, the managment of ACME would become sucessful in developing a
reputed psoition for itself in the coming future. If not, thne it would result in downfall of the
prosperity and makret value of the firm leading to reduction of its image and prosperity in the
coming age.
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