FINANCIAL ANALYSIS

Financial Analysis

[Name of the Institute]Financial Analysis

Task 1

1.1

The company London Woods Ltd has shown the full market share by 1 % per year, however the company needs to increase its product range therefore the sources available to the company London plc would be the share capital, as their customers are loyal and also they need cash to increase their product range, therefore they can generate the cash by issuing shares. The market reputation of the company is not well therefore (Royer, 2012) the company of London Woods plc will not be having the loan that will be provided by the financial institution therefore they can only generate cash by issuing shares.

1.2

The company can easily generate cash by issuing shares and it will be easy for them in order to purchase the machine for increasing their range of their products. The impact of these can be building of the negative image or perception in the minds of the share holders, because whenever a company issues a share, the very first question arises in the mind of individuals is that whether the company is in need to generate more cash or whether the company wants to increase its share holders but since the company is actually in need of generating cash as London Woods plc wants buy the machines, hence issuing shares therefore there will have a strong impact on the minds of the customer.

1.3

There are three sources of finance; these are shareholders, bank and the creditors. Since the company does not have the good market (Oster, 2011) reputation, and company already have the loyal; customer hence the bank or financial institution will not be appropriate for the company in order to generate the cash , and the company already issuing the shares so in order to generate more cash company can use the other short term credit or issuing more shares but the firm will be in more chances of liquidity or financial leverage therefore the firm can generate cash by short term creditors, by getting short term credits until the goods have been sold.

Task 2

2.1

Initially the company requires cost of 2580 as in the month of April and May the company would be incurring only cost, as the revenue generated by the business will be given back to the firm after the two months period. The total cost of the firm in the month of April and May is 2450 and 3130 respectively and the firm will be given 3000 for the expenditure hence before getting the cash for the sales company requires an amount of 2580. If company gets the amount from the bank then there will be the interest payment which will also causes an additional cost hence from the short term creditors and the by issuing shares company can generate the cash.

2.2

Importance of Financial Planning

The London Wood plc needs financial planning in order to generate and manage income efficiently and through financial planning the firm can manage and increase their cash flow by monitoring the expense of ...