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Managing Financial Resources and Decisions
Unit Outcomes Covered:
On successful completion of this unit a learner will:
1 Understand the sources of finance available to a business
.
2 Understand the implications of finance as a resource within a business
.
3 Be able to make financial decisions based on financial information
.
4 Be able to evaluate the financial performance of a business.
Key Points:
Your work should be submitted by the deadline.
The assignment must be your own work and original in all answers to the tasks.
All sources used should be correctly referenced in Harvard format.
You will be expected to check spelling mistakes and grammar before submitting your work
.
The London School of Business and Management Cover sheet should be used in every submitted work.
An appropriate report structure should be used, which may include headings such as: Table of Contents, Introduction, Discussion /Evaluation , Conclusions, References and Append ices (if necessary).
There should be clarity of expression in your work.
Your work should demonstrate, for example, relevant factual content and understanding of the subject, critical analysis,
evaluation, justifications, key arguments, correct use of appropriate models/framework etc.
Submission Regulations
1. “Assignment Front Cover Sheet ” must accompany every submitted work [Cover sheet is available from our Virtual learning Environment
– Moodle ].
2 .Assignments must be submitted on or before the due date, via Turnitin. Please refer to the LSBM Moodle for detailed assignment submission instructions
Assignment Brief
Purpose of this assignment
MFRD module is designed to give learners a broad understanding of sources and availability of finance for a business
. Learners will learn how to evaluate different sources of finance . They will learn about financial information and how to use them in planning and budgeting. Decisions relating to pricing and investment appraisal techniques are used in this module.
The module provides you with essential information for the purpose of finance and reporting in different organisations.
You are advised to use online information sources and academic literature to answer all parts of your assignment. You should also use academic material including textbooks and you must give credit to all sources you use and provide appropriate ref
erencing in your assignment
Task 1(LO1:Understand the sources of finance available to a business)
Scenario :You are planning to establish a new business or expanding the existing one. You need to forecast the level of investment required and make a plan to acquire the investment through different sources of finance (external and internal)
.The amount of investment required must be obtained from more than four sources of finance
Requirement: (AC1.1) Identify different sources of finance to run your business
.This can include raising funds through a combination of internal and external sources of finance. (AC1.2 ) Assess the implication of different sources of finance and explain the legal and financial implications of your choice .
(AC1.3) Evaluate appropriate sources of finance for your business project and discuss the advantages and disadvantages of your financial choice.
(Task 1 covers assessment criteria AC1.1, AC1.2 &AC1.3under LO1)
Task 2
(LO2: Understand the implications of finance as a resource within a
business)
(AC2.1) Identify and analyse the cost of finance for your chosen sources.
(AC2.2)
Explain the importance of financial planning and discuss why financial planning is important for the success of an
organisation.
(AC2.3)Evaluate the information needs of different decision makers within an organisation.
(AC2.4) Explain the impact of finance on the financial statements. Discuss how different types of finance and their costs would appear in the financial statements of your business.
(Task 2 covers assessment criteria AC2.1, AC2.2, AC2.3 & AC2.4 under LO2)
Task 3(LO3: Be able to make financial decisions based on financial information)
Scenario: Hollywood Conservatories Ltd produces a range of quality French Doors, Patio Doors, Conservatories & Windows
for customers for 20 years. Due to the rise in demand of products, the Managing Director (MD) of the company has decided to
expand production sites across various cities in the UK. MD is in consultation with finance team to evaluate the financial position of the company to know the financial ability to start a new production site in the UK
.You’ve been asked by the MD to prepare a cash budget for four months ending September 2014 on the basis of the given
information: The opening balance of cash on 1st June 2014 is £130 ,000.Total monthly sales for the four months ending September 2014 are forecasted as
Months Amount (£)
June
150000
July
156,000
August
135,000
September
190,000
Cash purchases during the relevant period are
Months Amount (£)
June
55,000
July
46,000
August
86,000
September
74,000
A new supplier has offered the company two months credit starting from June 2014 ; this means that goods bought on credit in June will be paid for in August and so on. The company plans to make the following credit purchases from this supplier
Months Amount (£)
June
28,000
July
36,000
August
38,000
September
30,000
The company pay s rent of £15 ,000 per month quarterly in advance. Payments are due on 1st June & 1st September
.
Months Amount (£)
June
22,000
July
24,000
August
30,000
September
38,000
The company will be repaying a Bank Loan at the rate of £9,000 per month. The last instalment is due in August 2014
. Customers are allowed one month credit from the date of sale . Other expenses are paid in cash within the same month
Requirement: (AC3.1)(a)Prep are Cash Budget for the four months ending September 2014
. Explain the MD of the store as to what does a ‘Surplus’ and ‘Deficit’ mean with reference to a cash budget. Give your
recommendations on any appropriate actions in case of a surplus or deficit balance situation.
Scenario: Hollywood Conservatories Ltd produces a product at the production site in Essex and incur the following
cost:
Variable Costs per unit: £6 5 Fixed Costs per unit: £50 Total Cost per unit: £115
You have been appointed as a manager by the Hollywood Conservatories Ltd and you have been asked by the MD to set
the price of that product.
Requirement:(AC3.2)
(a) Calculate the following: (i) Selling Price per unit (with markup of 30 %).
(ii) Total profit earned when 800 units are sold. (AC3.2) (b) You have been informed by the MD that the fixed cost is fully
recovered if 80 0 units are manufactured and any more production will not result in additional fixed costs. The company wants to know: (i) The selling price per unit (any additional units manufactured after 800 units) with amarkupof 30%.
(ii) The total profit earned when additional 4 00 units of product are sold.
Scenario: Hollywood Conservatories Ltd is considering three investment projects, only one can be selected.
You have been asked to identify which project the company should choose for investment . The following information is provided: Discount rate: 10%
Requirement: (AC3.3)You are required to assess the viability of a project using investment appraisal techniques
. Briefly explain which project would you recommend and why?
(a ) Net present value (NPV)
(b)Payback Period (years) (Task 3 covers assessment criteria AC3.1, AC3 .2 & AC3.3 under LO3)
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