RESOURCES AND DECISIONS

Managing Finance Resources and Decisions

Managing Finance Resources and Decisions

Task # 1

Identify, evaluate, and assess appropriate sources of finance for the following business financing issues facing a Public Limited Company (PLC).

A number of invoices that it is unable to obtain payment for that occur on a regular basis.

In order to finance this company can issue notes payable because this type of invoices usually can be covered by short term loans.

Expansion into Europe requiring £2 million in finance

The expansion of business usually requires huge investment therefore, for the expansion of business the company should use an appropriate amount of both equity and debt. The company may issue shares and debentures to its customers and can also borrow from the bank and other financial institutions.

One large invoice from a FTSE100 company which it cannot obtain payment for which is a one off transaction

For this kind of transaction a company can obtain bank loan or investment from other financial institutions or can float bonds and debenture in the market.

The takeover of another company - both are listed on the FTSE All Share Index

In order to take over a new company, a company can use finance from its retained earnings, long term banks loans and issuing new shares and binds.

Short term finance to cover a temporary (5 working days) cash flow issue which is unlikely to re-occur

The firm can issue notes payable and can obtain short term loans.

Task # 2

Effect over the Financial Statements

If a company issue debentures in order to raise the investment the debt portion of its capital structure will increase moreover the interest expense in its income statements will be add up. Whereas, issuing shares increase the equity portion of the capital structure. The company have to payback the return as either dividend or as capital gain. In both the cases the company has to bear a cost of capital. Taking loan in the form of issuing debentures to the investors is more profitable for the company than to issuing shares to shareholders, because if a company issue shares it will ultimately increase the number of claims to its net earnings. Whereas, by raising funds in the form of debt, the company has to pay a fixed interest rate to the debenture holders no matter how much more the firm earns.

Task # 3

Importance of Financial Budgeting and Planning

A community's financial budgets give unique financial information that investors and creditors utilize to assess a company's financial exhibition. Financial budgets are moreover significant to an outfit's supervisors being as how by producing financial budgets, administration can convey with intrigued outside gatherings about its fulfilment running the association. Better financial budgets centre on offbeat territories of financial appearances. A group's financial conditions are of a major concern to investors and creditors. As capital suppliers, investors and creditors rely on a company's financial conditions for both the security and profitability of their investments. More in particular, investors and creditors should know where their coin went and where it is ...