The document is an assignment for learners studying managing financial resources for a business. It provides two scenarios and associated tasks. The first task involves creating an information pack identifying sources of finance for businesses and providing case studies. The second scenario has the learner taking a temporary role as a financial consultant for a company, which involves analyzing a cash flow forecast, making recommendations to address cash flow issues, and performing an investment appraisal of two projects using net present value.

1. L o c u s R A G S
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Shubham Mishra
The purpose of this assignment is to give the learners a
broad understanding of the sources and availability of
managing financial for a business organization. Learners
will learn how to evaluate these different sources and
compare how they are used. They will learn how financial
informationisrecordedandhow touse this information to
make decisions for example in planning and budgeting.
Managing Financial
Resources Assignment

2. Managing Financial Resources
Assignment
The purpose of this assignment is to give the learners a broad
understanding of the sources and availability of managing
financial for a business organisation. Learners will learn how
to evaluate these different sources and compare how they are
used. They will learn how financial information is recorded and
how to use this information to make decisions for example in
planning and budgeting.
Decisions relating to pricing and investment appraisal are also
considered within the unit. Finally, learners will learn and apply
techniques used to evaluate financial performance
Scenario (Task 1)
Since embarking upon your HNC in Business you have been
looking for a new job in finance or accountancy. You have had a
number of years of experience working in industry and you
would be particularly interested in a role which involved
working with and advising local businesses. Eventually you
secure a post with a large firm of accountants as a Finance and
Business Advisor. This is a new departure for the company who
have, traditionally, concentrated upon accountancy and
auditing services.
Task 1A

3. As a starting point, the senior partner in the company suggests
that you put together:
 A detailed information pack for new and existing businesses
which:
 Identifies the sources of finance currently available. The pack
should be aimed at the full range of business types – new and
old, large and small – and for new business start-ups and those
wishing to expand.
 Assesses the implications of each source including the relative
advantages and disadvantages to the business, the legal aspects,
the costs and the suitability for purpose.
 Provides three case-study examples for businesses. These
should include a small business start-up, a large business
expansion and small group of people who are looking to buy up
an existing medium-sized company. Finance sources should be
carefully matched to needs.
(This provides evidence for outcome 1 – assessment criteria 1.1,
1.2 , 1.3 and for outcome 2 – assessment criteria 2.1)
Task 1 B
You are given the following information from the company’s
financial statement.
£000 £000

4. From the balance sheet as at 31 March 2003 31 M
Stocks 12482 1186
Trade Debtors 32287 2841
Trade Creditors 17048 1358
Total Asset less current liabilities 47505 3491
Creditors Due after more than one year 13388 6870
Share Capital ( 25p share) 6782 4282
From the profit and loss account for the year ended 31 March 2003 31 M
Turnover 205157 1825
Cost f goods sold 172065 1537

5. Expenses 27342 2228
Interest Payable 1925 1220
 The above information contains information from both the
Income Statement of the company and the statement of the
financial position. Discuss the purpose of these financial
statements.
 Analysis of the above information reveals that the company is
financed by both debt capital and equity capital. You have been
asked by the directors to prepare a short report on the costs of
these different sources of finance. You are expected to discuss
what factors should be considered by directors when taking
decisions regarding the mode of financing.
 Selecting suitable sources of finance as 1.1 is an example of
financial planning. Discuss other instances of financial planning
and analyse the importance of financial planning to the
company.
 The above information contains extracts from both the Income
Statement and Statement of Financial position. Discuss how
these statements meet the information needs of various
stakeholders of the company.
 Discuss how different forms of financing affects the format of
the financial statements.
Calculate the following ratios and comment on the performance
of the business over the two years;

6. Cash Flow Forecast for a new business - Northfield Components Ltd: Jan 200
JAN FEB MAR APR MAY JUN JUL AUG
£000
's
£000
's
£000
's
£000
's
£000
's
£000
's
£00
0's
£000
's
Brought Fwd. 40
Sales 200 300 300 300 250 260 300 260
Total Income 240 300 300 300 250 260 300 260
Purchases 150 140 135 135 140 130 135 145
Wages 55 55 55 55 55 55 55 55
Rent & Rates 56 56 56
Light & Heat 55 55
Advertising 2 2 2 2 2 2 2 2
Insurance 55 52
Equipment 50 10 10 10
Vehicles 20
Directors Salaries 22 22 22 22 22 22 22 22

7. Motor Expenses 11 11 11 11 11 11 11 11
Sundry Expenses 11 11 11 11 11 11 11 11
Total
Expenditure 432 251 291 302 293 296 292 246
Monthly -192 49 9 -2 -43 -36 8 14
Deficit/Surplus
Accumulative
Deficit/Surplus
-
192
-
143
-
134
-
136
-
179
-
215
-
207
-
193
Gross profit margin
Stock Turnover
Debtors Collection period ( Debtors Days)
Creditors payment period ( creditors days
(This provides evidence for outcome 2 – assessment criteria 2.1,
2.2 , 2.3 and 2.4 for outcome 4 – assessment criteria 4.1,4.2 and
4.3)
Scenario (Task 2)

8. The Financial Accountant of Northfield Components has
recently resigned and left his post with immediate effect. The
Directors decide to advertise for a replacement but realize that
the recruitment process may take up to three months. In the
short term they decide to bring in a financial consultant to tide
them over until a permanent appointment is made. You are
asked by your line manager to take on this role – initially for
three months
Task 2A
On your first morning in early January 2008 the Directors
present you with the cash budgets prepared by the departed
financial accountant. You are given the budgetfor the twelve
months from January 2008. The directors are concerned about
the likely cash deficits shown in the cash budget.
Cash Flow Forecast for a new business - Northfield Components Ltd: Jan 200
JAN FEB MAR APR MAY JUN JUL
£000
's
£000
's
£000
's
£000
's
£000
's
£000
's
£00
0's
Brought Fwd. 40

9. Sales 200 300 300 300 250 260 300
Total Income 240 300 300 300 250 260 300
Purchases 150 140 135 135 140 130 135
Wages 55 55 55 55 55 55 55
Rent & Rates 56 56 56
Light & Heat 55 55
Advertising 2 2 2 2 2 2 2
Insurance 55 52
Equipment 50 10 10 10
Vehicles 20
Directors Salaries 22 22 22 22 22 22 22
Motor Expenses 11 11 11 11 11 11 11
Sundry Expenses 11 11 11 11 11 11 11
Total
Expenditure 432 251 291 302 293 296 292
Monthly -192 49 9 -2 -43 -36 8
Deficit/Surplus

10. Accumulative
Deficit/Surplus
-192 -143 -134 -136 -179 -215
-
207
 Using the information given in the cash budget identify the
main problems that Northfield Components are faced with.
 Identify the likely causes of the problems and how they might be
remedied and avoided in the future.
 Make recommendations for improving the cash budget with a
view to minimizing the cash deficit or, possibly, generating a
cash surplus.
You are required to present your findings and recommendations
in a formal written report to the Directors of Northfield
Components Ltd.(This provides evidence for outcome 3 –
assessment criteria 3.1)
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Task 2B
The Directors of North Seaton Engineering Company are
considering two alternative business projects each of which
involve an initial investment of ? 450,000. In your role as
financial consultant you are asked to advise the Directors which
of the two projects would be the more financially viable.
Project ‘A’ involves the introduction of modern, hi-tech
machinery into the company’s main production unit. This will
result in significant increases in output and substantial savings
in production and maintenance costs. This in turn will result in
a net increase in turnover to the company of:
Year 1 - ? 180,000
Year 2 - ? 230,000
Year 3 - ? 280,000
Year 4 - ? 120,000
Project ‘B’ involves an increase in the company’s marketing
activities. The Directors would employ one of the region’s most
prestigious marketing companies to manage a massive national
campaign. They feel that business could be increased without,
necessarily, updating production processes. In is anticipated
that the net effect of their campaign would bring in additional
annual turnovers of:
Year 1 - ? 60,000
Year 2 - ? 120,000
Year 3 - ? 250,000

12. Year 4 - ? 250,000
As financial consultant, you are asked to carry out a full
investment appraisal of the two projects. In order to fully assess
the pros and cons of the two alternatives you decide to employ a
number of appraisal techniques:
Net present value.
For calculation purposes, you assume that the cost of capital
will remain fairly static at around 6% per annum over the four
year period.
Your appraisal should be presented in the form of a written
report to the Directors and include all financial computations
and a summary of the conclusions which can be drawn from the
results of the appraisal – including recommendations as to
which project should be taken on board.
Task 2C
A company producing puppets produce the following cost
information:
Per Puppet
£
Direct Materials 3.00

13. Direct Labour 1.10
Variable Overheads 0.70
Fixed costs ( for year)- production £6500
- Selling £2800
If the company produces 40000 puppets calculate the cost per
puppet using full costing method. If the company adds up 15%
on cost as the cost plus mark-up, calculate the price at which the
puppets will be sold for.
LO1 Understand the sources of finance
available to a business
1.1 Identify thesources of finance available to a business
1.2 Assess the implications of the different sources
1.3 Evaluate appropriate sources of finance for a business
project
LO2 Understand the implications of
finance as a resource within a business

14. 2.1 Analyse the costs of different sources of finance
2.2 Explain the importance of financial planning
2.3 Assess the information needs of different decision makers
2.4 Explain the impact of finance on the financial statements
LO3 Be able to make financial
decisions based on financial
information
3.1 Analyse budgets and make appropriate decisions
3.2 Explain the calculation of unit costs and make pricing
decisions using relevant information
3.3 Assess the viability of a project using investment appraisal
techniques
LO4 Be able to evaluate the financial
performance of a business
4.1 Discuss the main financial statements
4.2 Compare appropriate formats of financial statements for
different types of business
4.3 Interpret financial statements using appropriate ratios
and comparisons, both internal and external.