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Managing Financial Resources Essay

1845 words - 7 pages

British Institute of technology and E-CommereceUnit 2Managing financial Resources and DecisionsLevel: Level 4 - HNC and Level 5 - HNDTask 1Introduction:The business world is currently facing a plethora of pressures in terms of finding credit to finance their business. Currently there is a great short fall in money in the markets. As a result most companies and fighting to stay afloat. The business world is facing the biggest credit crunch since the late 1940s.In this report the Living wood furniture Retail Company will be taken as an example to show the sources of financing available for businesses, implications of finance as a resource within a business, make financial decisions based on financial information and analyses and evaluate the financial performance of a business.1a.)Identify the sources of finance available to Living woodFinance plays an important part of modern business world. Financial resources are every business success point. Without a financial backup whole company will be unproductive. There are two main finance types in business that are long term and short term finance. The definition of Short term financial sources is that a company that will able to gain finance in a shorter time. They are, bank loans, over drafts, trade credit, leasing, credit cards. Loan term financial sources are Bank loans, Share capital, Debentures, Asset sales, Venture capital, owner's capital.When it comes to living wood same financial sources are help to living wood authore will mention some of important finance for living wood,-Getting lease -it's good idea for the living wood because this case study they describe about getting two machines but financial manager told that they don't have money to buy it so getting lease is better to boost the production.-Credit facility from the supplier - ask the supplier from credit.Issues shares - Living wood is the small private limited company the shareholders can bring in capital by issuing the shares.Bank loan - Living wood get over from their current situation and because of their previous profits the management will be able to get a good reply from their bank.Bank Overdraft - Living wood careful about inters and before going to like this financial source should think they have ability to pay over draft.Figure 1: Sources of financing for SME's, SME's survey report 20081b.)Why would some sources of finance be more appropriate or better in some situation than the others?When financial comes to business there are two types of major sources that are internal and external,Internal sources:Sales of capitalWorking capitalPersonal servingRetained profitsExternal sources:Ownership capitalNon-ownership capitalBecause of this deferent sources of finance style some situation better than other situation. It's same as Living wood for an example, taking loans or debentures will be a good idea than getting shares for living wood because if taking loan monthly payment or interest fixed it good for Living wood.The duration...

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