FINANCIAL MANAGEMENT

Managing Financial Resources & Decisions





Task 11

(a)Highlighting the sources of finances available to London Woods1

(b)The Affect of Highlighted Sources of Finance on London Woods Inc.3

(c)Evaluation of Capital Expenditure Sources Available to London Woods Inc.4

Task 25

(a)Cost of Source of Finance Available to London Woods Inc. - An Analysis5

(b)Importance of Financial Planning to London Woods Limited6

(c)The Purpose of Material Information in Decision Making Process8

(d)Affect of Sources of Finance on the Financials of London Woods Limited9

Task 310

Task 411

References15

Managing Financial Resources & Decisions

Task 1

Highlighting the sources of finances available to London Woods

Companies usually have a wide range of choices available in terms of various products & solutions from their creditors that aids them in expanding their business and ensures that the businesses tend to operate continuously and strives for the competitiveness and success even in the era of tight market conditions and economic slump. There can be numerous reasons for which the company might need to raise the funds. The two main components that can trigger the need for raising the funds are (i) nature of the business (ii) size of the business. The source of finances are broadly categorized intro two main categories i.e. internal financing and external financing. Depending upon the requirement of the business, the firm can raise the funds for the required tenure i.e. either long-term or short-term. The companies that are listed on the stock exchange are named as limited firms either public or private limited. The financial sources of a firm are long term, medium term and short term (Thomas, 2001, pp. 56-62). The short-term financing refers to the financing available for the company for a period of one year or sometimes two years. The medium term financing has a tenure span of about three to ten years. Lastly, the third option, long term financing has a tenure more than ten years. London Woods is a medium-sized private limited company. The financing options that are available to the company in the need of the expansion of the business are:

Personal savings

Retained earnings

Working capital

Fixed assets

Bank Overdraft & Loan

Trade Credit

Share Capital

Issue of shares

Venture Capital

Businesses need to maintain better relationships by complying with the terms and conditions outlined by the creditors or the financiers so that company can avail finance at any time in future without any problem or difficulty. A firm might requires the financing for its operational and strategic needs, for example starting up a new business, expanding its business, acquisition of fixed assets, improvise its working capital, to innovate the product or swapping the loan. As financial resources are classified into two categories i.e. internal and external, as aforementioned. The internal sources of the financing is defined as a financing that can be raised within the firm. Such sources can be like sale of a fixed asset that is kept in excess by the firm, retained earnings and equity of the company. As far as external source of financing are concerned, it is referred as the financing obtained from outside the ...