Managing Financial Resources and Decisions Assignment 1 BTEC Nguyen Huu Phong 2017

Managing Financial Resources and Decisions Assignment 1 BTEC Nguyen Huu Phong 2017 tại University of Greenwich Viet Nam, đây là một trong những môn rất quan trọng và cần thiết cho những người muốn theo nghành businness cụ thể là human resource management như mình. Bài assignment này được mình làm tại trường. Các bạn có thể xem và tham khảo nhưng lư

ASSIGNMENT FRONT SHEET <No.1>

Qualification BTEC Level 5 HND Diploma in Business

Unit number and title H/601/0548: Managing Finance Resources and Decisions

Learner declaration:

I certify that the work submitted for this assignment is my own and research sources are fully acknowledged

Grading grid

Assignment title Sources of Finance

In this assignment, you will have opportunities to provide evidence against the following criteria

Indicate the page numbers where the evidence can be found.

no.

Assessor’s Feedback

LO1 Understand the sources of finance

1.1 identify the sources of

finance available to a

business

Summary all available sources for this specific firm - Explain why other sources are not available for this firm

1.1

1.2 Assess the implications

of the different sources

Discuss on each available source

of finance to the firm- Identify the advantages and

disadvantages of each source

1.2

LO2 Understand the implications of finance as a resource within a business

2.1 analyze the costs of

different sources of finance

Analyze tangible and opportunity costs, and tax effect of each source of finance

2.1

2.2 Assess the information

needs of different decision

makers

Summarize all the information needs for financing decision required by Managers (Including Financial and Non-financial information)

2.2

2.3 Evaluate appropriate

sources of finance for a

business project

Make decision on sources of finance–explain the reason for choosing a specific source of finance for this project using a wide range of criteria

2.3

(note on Merit/Distinction if applicable)

Merit descriptor No (M1) Identify and apply

strategies to find appropriate solutions

Merit descriptor No (M2) Select/design and apply

appropriate methods/techniques Merit descriptor No (M3) Present and communicate

appropriate findings Distinction descriptor No (D1) Use critical reflection to

evaluate own work and justify valid conclusions

Distinction descriptor No (D2) Take responsibility

managing and organizing activities

Distinction descriptor No (D3) Demonstrate convergent/

lateral/ Creative thinking

Summative feedback

IV Grading Check: Comments if any:

Agree

Disagree Modify grade to

Introduction 8

LO1 Understand the sources of finance 1.1 Identify the sources of finance available to a business 8

1.2 Assess the implications of the different sources 9

LO2 Understand the implications of finance as a resource within a business 2.1 Analyze the costs of different sources of finance 11

2.2 Assess the information needs of different decision makers 12

2.3 Evaluate appropriate sources of finance for a business project 14

Conclusion 14

References 15

A business wants to exist and to develop that it based on the rational decision of the leaders in the business To give the decision that the leaders need the solid knowledge of financial resources in the business Understanding financial sources inside and outside the business will help make the most appropriate decision to bring about optimal profit Report post here will help us better understand the definitions, financial analysis and the source of costs in the business and from sources outside investments

LO1 Understand the sources of finance

1.1 Identify the sources of finance available to a business

Accounts payable

Accounts payable is an accounting item expresses the entrepreneur's obligation to pay all of its short-term debt to creditors Short-term debt is the debt that businesses have to pay during the period from 1 year back down The term AP not only limited using for business finance At the household level, we will also have to pay the Bill of goods the consumer service monthly For example, the money of phone, water, gasoline Each company provided services will provide service before, bills are sent once we have used Each request for payment of invoices shall be paid immediately If the individual or company that does not pay its bills will be considered insolvent

Short term loan

Short term loans term loans are charged within a production cycle of the normal business or within a financial year and it is in contrast to the term loans long term This may be the proceeds of the loan, Bank loan organizations, or individuals in and outside the business Short-term Loan account in accounting to reflect the short-term loan amount and loan repayments situation of the business Your short term loans are shown on the balance sheet include the short-term debts, accounts can pay accumulated debts, and other types of debt

Long term loan

Long-term loan consists of loans and financial obligations lasting over one year The long-term loan for a company would include any financing or leasing obligations that are to come due in a greater than 12-month period Long-term loan also applies to governments and nations can also have long-term debt

Bond

Bond is simply a loan company The loan portfolio by buying bonds of which the company released In return, the company will pay interest for the period predefined periodically (usually annually or semi-annually) and to repay the principal at maturity, termination of debt

Owner Equity

Owner Equity is owned by business owners and members of the joint venture company or the shareholders in the company

Retained Earnings

Retained Earnings is not used to pay dividends that are retained to reinvest according to strategic goals or

to pay the debt Profit retained is shown under the owners ' equity in the balance sheet

Retained profit is calculated by adding the profit retained (the previous year) and net income minus dividends paid to shareholders

Retained Earnings (RE) = Beginning RE + Net Income – Dividends

In most cases, the company retained profits to invest in areas where companies can generate good growth opportunities, such as buying new equipment or spend more money for research and development (R & D)

1.2 Assess the implications of the different sources

Short –term debt Short term loans usually require the

standard of comfort and lightness over the loans of the banks or other lending sources in the Government

The approval and fast is a trait that the company or business often interest The approved short term loans usually take place quite rapidly from a few hours to a few days

High interest rates have a major disadvantage The interest rate of short-term loans is usually much higher than long-term loans

Long – term debt Flexibility in the balance when the Interest on debt is permanent burden to the

capitalization of major business capitalization

Bondholders are creditors and have

no interference in business operations because they are not entitled to vote

The company can enjoy tax saving on interest on the debt

company Company has to pay the interest

to bondholders or creditors at fixed rate whether it earns profit or not It is legally liable to pay interest on debt

Debt usually has a fixed maturity date Therefore, the financial officer must make provision for repayment of debt

Debt is the most risky source of long-term financing Company must pay interest and principal at specified time Non-payment

of interest and principal on time take the company into bankruptcy

Only large scale, creditworthy firm, whose assets are good for collateral can raise capital from long-term debt

Equity No Interest Payments - You do not

need to pay your investors interest, although you will owe them some portion of your profits down the road

No Liability – If the business doesn’t succeed, the investors are the ones who take the hit

No Monthly Payments - You probably won’t need to make monthly payments until you make a profit – which keeps more cash in your pocket while you get things up and running

Lost part of the control of business when the investor owns so much stock in the business Every decision is not exclusively

in the hands of founders which will be decided based on who owns the investment shares

Bonds Bonds tend to rise and fall less

dramatically than stocks, which means their prices may fluctuate less

Certain bonds can provide a level of

Historically, bonds have provided lower long-term returns than stocks

Bond prices fall when interest rates go up Long-term bonds, especially, suffer from

income stability.

Some bonds, such as U.S Treasuries, can provide both stability and liquidity

price fluctuations as interest rates rise and fall

Accounts

payable

Tighter document controls Better resources

Easy procedure documentation

Error reporting Exception processing Duplication issues

Retained

Earnings

To help the company increase the value on the stock market, solid financing for a company that helps companies develop and bring the source of dividends to investors

Low dividend rate and shareholders do not benefit in full from the income of the company Easily influenced to value the market when business activity does not meet the expectations of investors

LO2 Understand the implications of finance as a resource within

a business

2.1 Analyze the costs of different sources of finance

Tangible Cost

A quantifiable cost related to an identifiable source or asset Tangible costs represent expenses arising from such things as purchasing materials, paying employees or renting equipment

Example: Customers who bought a faulty phone at a mobile phone shop and this error due to the mobile phone shop Mobile phone shop must compensate the cost value of the phone to the clients, this is considered tangible costs On the other hand the client unhappy and complained about the quality of the mobile phone shop for friends or anyone else, the phone shop's revenue will be affected and this also considered intangible costs

Opportunities Cost

Opportunity cost is a useful concept used in the theory of choice It is applied very frequently and widely

in economic life Opportunity cost based on the facility's scarce resources should compel us to make

choices Choice i.e perform trade-off, i.e to receive a benefit that would compel us to Exchange or overlook a certain cost to it As such, the opportunity cost of a choice is the value of the best overlooked when making the choice (and is losing benefits when choosing this approach that does not choose other; Selected other projects might be better option selected) Due to the rules of scarcity should always exist the trade-off when making the choice Or in other words, the opportunity cost always exists

Example: You quit a job at a software company with a salary of $ 5,000 per month to go to the sale of clothing, one month you only got $ 3,000 profit 5000USD you bypass is considered the opportunity cost

Tax Shield

Tax shield (tax shield) is a term that economists talk about reducing corporate income taxes payable to the State by reducing taxable income In other words, before the tax shield, corporate income taxes are collected from enterprises is more than when businesses have tax shield Tax shield reduces the payment

of taxes to the State and increases the assets to shareholders and creditors

Example: a business investing in a project with the total amount of capital is 400 million VND Income before tax and interest of the loan is 100 million VND With the enterprise income tax is 28%, we see: + Business case does not borrow money to invest that use only the internal capital resources: taxable income is 100 million VND, corporate income tax payable is 28 million VND

+ Business loan case 400 million VND to invest, with the loan interest rate is 10% of loan interest rates:

by 40 million VND, so it should the taxable income is 60 million VND Corporate income tax payable now only 16.8 million VND Tax shield in this case has a value: 400 million VND x 10% x 28% = 11.2 million VND

2.2 Assess the information needs of different decision makers

Financial information

 Balance sheet: Is a financial report including the company's current assets, liabilities, owner's equity company in a specific moment

The balance sheet adheres to the following formula:

Assets = Liabilities + Shareholders' Equity

 Income statement: Is report business results are important because they demonstrate the profitability of a company in period certain accounting Accounting period in the report was selected by the enterprise and can be changed The main point in the financial statements is that it represents the revenue, expenses, profits and losses, but it does not reflect the amount that companies receive or the amount that companies spend

 Cash flow: Cash flow is a term that refers to the amount that a firm received or paid during a defined period of time, or in a certain project Cash flow statements is statistics of the cash flow of the business, is one of the three most important financial statements of enterprises This report is used to determine the level of sustainability in the short term of the business If cash increases (positive operating cash flow) then it will increase liquidity for the company, ready to meet the demand for cash

Non-financial information

 Press release: A press release is a short text, it is usually just one page, aimed at calling for

awareness and attention to an event or an issue worth your company's news Press releases are sent

to all types of press information: print, radio, and television If this press notice is the media for is actually have news value, it can bring to a significant awareness of the public about events and issues of your company

 Vision and Mission

Mission often focus on the present Handle the current problem, clearly defined customer, the implementation process, and activities necessary for the company to deploy

Vision is often focused on the future It describes the next direction of the company to catch up and meet the market and sectors are trading In addition, proper vision can make company leading the trend and strong growth

For example:

Tiki’s mission and vision as follows:

- Vision: "Become an e-commerce company not only goods but also the services Change the way everyone's shopping in the future"

- Mission: "Meet the needs of online shopping in Vietnam Facilitate quick, convenient, secure online shopping"

The users of financial information.

Internal: Managements, Employees, Owners Used to analyze and improve the company's

business situation, analyze the feasibility and profitability of investment houses, giving the future direction for the company

External: Creditors, Tax Authority, Investors Feasibility analysis for investment and corporate,

determine the level of reliability of the company based on the tax

2.3 Evaluate appropriate sources of finance for a business project

I have a small project is to set up a software technology company with products is an English learning application using AI to help people learn more easily After many of our calculation then the amount we have to invest in order to implement the project is about 500 million VND

However, due to our initial capital only 320 million VND so we don't to sufficient funding The calculations showed that the amount of money we need to add is about 180 million VND We decided to bank loans to carry out this project Through analysis we found was that the Bank really bring some benefits for my project

Specifically, I will have to be large and fast capital initially Besides, the loan is due, we will not lose the right to decide in its projects as work thanks to funding from investors I have the right to property and the freedom to decide to grow and develop your business The Bank loans are also beneficial as it helps us reduce the tax money down because the interest is tax deductible This is also a benefit of loans instead of taking the entire funding of itself

Conclusion

To the business activities of a business and then develop fluency, leaders need to know and understand the financial resources that existing businesses as well as the financial resources from outside to make the decisions The ability of financial analysis, cost and other resource factors are the key factors in success