Report on financial management

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Financial Management

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TABLE OF CONTENTS
INTRODUCTION..........................................................................................................................3
i)Estimating investment, cost and revenue of events...................................................................3
ii) Evaluating different sources of finance available to fund the events......................................5
iii) Identifying selling price per ticket using supporting argument from research of
the current market .......................................................................................................................7
iv)Investment appraisal techniques..............................................................................................9
CONCLUSION ............................................................................................................................11
REFERENCES ..............................................................................................................................12

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INTRODUCTION
Financial management refers to managing various financial activities of firm that
assists in increasing profitability and reducing cost of production. Present report is
about Connecting Venues which is based in London, UK. The organization provides
variety of event management services as per the specific need of clients. It has several
types of clients such as large organizations and government bodies as well as charities
(Connecting Venues, 2015). Under this report, two similar events have been taken into
account that consists of music events and film festival. The selection of these two
events are justified in the light of profitability and preferences of clients. In this regard,
estimation about investment and cost have done in order to provide good quality of
services to number of buyers. Furthermore, different sources of finance have been
evaluated that aids to organize event in an effectual manner. In addition to this,
investment appraisal techniques have been analyzed to select the best project so that
management can ensure about optimum utilization of limited resources.
i)Estimating investment, cost and revenue of events
The estimation of investment, cost and revenue for single event as music festival
will be calculated. This has been selected because of high preferences from the side of
youth and they like to attend these types of events. It provides evidence that corporation
can generate large amount of money by organizing these events as there will be number
of customer who are ready to pay high amount in order to satisfy their need. Owing to
this, music festival will be planned in accordance with seasonal themes (Alegre, 2006).
The event will be initiated in summer and it is named “Diverting summer music festival
2015- Treasure of fun”. There is inclusion of variety of DJ, dancing and food as well as
number of entertaining activities in the event. All these prove to be effective for
raising the source of income. For example, food services aid to increase revenue to a
great extent because people tend to have variety of drinks as well as snacks at party
time. Since, residents of UK like professionals and students want to have fun in night

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parties; so, the proposed event is the most suitable. Further, this event will be organized
at the Wembley stadium that is situated in London HA9 OWS, UK (Bladen and et. al.,
2012). It is because majority of people can easily reach at the destination and they also
get enough space over there. In order to give ease to the customers, events will be
organized in weekend for three days such as Friday, Saturday and Sunday. It leads to
increase demand for the events and facilitate to give higher level of satisfaction among
them. In addition to this, estimating financial requirement is the crucial factor for
organizing the event because management have to prepare budget in order to increase
profit and decrease cost of production.
(Source: Aries music festival, 2014)
On the basis of following table, management can be able to anticipate cost and
initial investment that is required to organize the event “Diverting summer music
Illustration 1: Music festival

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festival 2015- Treasure of fun”. It has been estimated that 1 million pound is required to
organize the events and manage all the activities in an effectual manner.
Activity Cost
Initiation (decoration) 220000
Rent 120000
Amusement activities 50000
DJ 250000
Logistics 80000
Payment to performers and other artist
(two artists)
100000
Promotional activities 30000
Food and drink 150000
Total 1000000
Table 1: Cost of production
As per the aforementioned table, financial cost is allocated to different activities of
proposed event. Here, at the initial stage, 220000 pounds will be required in order to
arrange for the events. It consists of mainly decoration that aids to give good ambiance
to the audience and participants. Further, 120000 will be paid for the rent of the stadium
and also 80000 will be paid for the logistic. This way, corporation can be able to reduce
the gap between actual and expected results. Likewise, overall initial investment is 1
million pound that helps to provide good quality of services to number of customers
(Broadbent and Cullen, 2012). Furthermore, management expect that event generates
1.10 million pound income that facilitates to recover all the cost and increases overall
rate of return. It can be said that Connecting Venues can make out enough profitability
and also give higher level of satisfaction among users. In addition to this, food and
beverages are likely to incur cost of 130000 pounds and it is expected to generate
150000 pounds. This is because the different types of foods and drinks will be available
in the event that leads to cater need of number of buyers. It is an effective way to
increase demand among customer especially students and rest of the youth segment.

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Hence it can be said that, management Connective Venues can create competitive edge
in the marketplace that has direct impact on its brand image. It proves to be effective to
generative huge amount of profit and using the same in order to expand business over
the globe.
ii) Evaluating different sources of finance available to fund the events
There are different types of financial resources available to fund the events that
are to be organized by Connecting Venues. The firm has good financial positive that
depicts that it can arrange resources internally as well. However, it is necessary to take
into account feasible sources by which management of can manage all activities in an
effectual manner (Musgrave, 2011). In this regard, retained earning can be used by the
firm for organizing events. It is because, firm will not have to pay its cost to outside
party and it its does not require high time to arrange the sources. Following sources of
finance are feasible for the music event and film festivals-
 Retained profit- It is the most effective to raise the fund for the purpose of
proposed event. Under this, at every year end, Connecting Venues keep
some amount of profit separate in order to use the same for future production.
Owing to this, this amount can be used for event because it will be easily
arranged (Ojha and et.al., 2013). However, it create opportunity cost because as
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Financial management,
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the firm uses retained earning in some other purpose then it just losses the
opportunity to use the same in other business activities. Because, retained profit
is generally kept separate in order to meet the contingency or day to day
operation. It contribute towards saving time as well as cost of firm that
facilitate to increase overall rate of return of company.
 Bank loan- It is the another imperative source of finance by which company
can be able to fulfill long term finance need. In this, interest as the cost, have to
paid to the bank on time to time otherwise it hampers credit rating of company.
For example, if corporation fail to pay its installment or interest on right time
then banks of financial institution may give poor rating that create barrier for
growth of firm. Further, it requires long time to complete the formalities for
acquiring loan (Chang, 2005). Owing to this, there may be delay in operation
that creates additional cost for the company. In addition to this, by the help of
bank loan Connecting Venues raise long term money so as to execute the
project on right time. It can critically evaluated that interest rate incur high cost
to organization that may lower done overall profitability. SO, if company plan
to raise fund thorough bank loan then it must consider the cost in the form of
interest and also the payment time. On the other hand, bank overdraft is
another means of taking fund for expansion and execution of new project
(Emiliani, 2006). It provides credit facility to company by which management
can get money for some span of time. However, bank charges high interest rate
for such type of short term money that leads to increase overall cost of the same.
 Leasing companies- Connecting Venues can also access to trade credit to fulfill
requirement of finance. BY making use of this source, organization can access
to highly equipped technology that prove to be effective while organizing event.
In this, leasing companies gives machinery and other equipment on rental basis.
Here, agreement take place between leasing companies and Connecting Venues
in order to have technological assistance (Jalal-Karim, 2013). It is helpful in

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catering specific need of companies in order to provide good quality of services
to large number of buyers. On the other hand, management need to bear
different types of cost such as depreciation, repair and other that create cost and
decreases profitability.
Therefore, it can be said that, retained earning and bank overdraft is the appropriate
source for Connecting Venues. It is because these sources aid to incur low cost and can
be easily arrange with short span of time. It facilitate to save overall time. Furthermore,
bank overdraft is the effective way whereby firm can be able to arrange large amount of
money for short span of time. It contribute towards organizing music event and film
festival in an effectual manner that contribute towards achieving long as well as short
term objectives of company.
iii) Identifying selling price per ticket using supporting argument from research of the
current market
Pricing is the foremost factor by which company generate revenue and assist
management to recover cost of production in an effectual manner. Here, company set
the selling price in between 100-300 that facilitate to increase revenue. It has been
found out from the previous events that were organized in the London. It aid to recover
different types of cost such as rent, food and other cost that is associated in the
services that is being offered by Connecting Venues (Kutsch, 2008). The
aforementioned prices has been decided by keeping in mind purpose power of
customers and also their preferences towards the prices. It facilitate to increase
demand of music festival at the marketplace and also increase number of buyers.
Furthermore, prices of music events is set by taking into mind overall cost and also
adding margin in the same. It leads to increase the revenue and deliver good quality of
services to large number of customer within affordable prices.
There are different types of pricing strategies are used on the basis of specific
objectives of company (Hardy, 2003). It consists of premium, economy and skimming
as well as penetration pricing. Along with that market oriented pricing is also used that

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create favorable market environment and give same right to all sellers (Luckham,
2011). Under this, penetration pricing is used in order to attract large number of
buyers and give them higher level of satisfaction so as to create awareness among
regarding services of company. Here, Connecting Venues can keep low prices for the
services and after increasing number of customers it changes the prices accordingly. It
aid to cover large market potential and raise awareness among general public regarding
the brand availability. It proves to be effective to successfully introduce product or
services at the market place and let the customers know about the same in an useful
way.
Economic prices is the another pricing strategy in which prices are
kept moderate to target at the specific segment. It facilitate to build good relation
with customers and also helpful in increase profitability as well as sales turnover. In
addition tot this, premium pricing is the another strategy thereby management set
higher prices for the products and services that are bring offered by the firm (Musgrave,
2011). It leads generate higher profitability because customer perceive the good quality
of product. It contribute towards increasing brand image of the firm and also facilitate
to give higher level of satisfaction among large number of buyers. However, it is
effective in case of new product where product is highly differentiated from the existing
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one. It contribute towards increase overall rate of return of company at the marketplace.
Furthermore, market oriented pricing is one of the effective strategies of pricing
because in this, management changes prices on the basis of modification in the pricing
of competitors. It aid to recover all the cost that have been covered in order produce the
products as well as services. For the present report, Connecting Venues will select
market oriented price so it can create its unique identity at the marketplace (Allen and
Economy, 2011). It can also be justified in the ground of ethical conduct of business
as well as satisfaction among customers. From the current market research, all the
firms that have organized events in London was financial sound and they sets prices
according.
As per the research, Connecting Venues will charges comparatively higher prices
(Ponsford, 2011). It is because, firm is giving several types of additional services for
example of variety of food services on less prices. Here, customers are ready to pay
current prices that are offered by Connecting Venues because of providing services on
the basis of their own specification. Along with that, it proves to be effective for
corporation in order to recover the initial investment and increase overall rate of return.
It aid to create goodwill of company at the marketplace and also provides opportunity
to expand business. It contribute towards creating distinctive identity of company. This
way, Connecting Venues can make out large amount of profitability and increase
number of buyers.
iv)Investment appraisal techniques
Investment appraisal is the imperative technique by which company can select the
best project that aid to save cost as well as time. In the present report, different types of
methods are being used such as pay-back, average rate of return and internal rate of
return. Along with that net present value method is also used that facilitate to take the
right decision in the light of cost as well as profitability (Grewal and et.al., 2011).
These is the imperative way to create build goodwill at the marketplace. These
techniques are explained as follows-

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 Pay-back- It is the imperative way to assess the viability of the project because
management come to know about the time span in which they can be able
recover the initial investment. Here, decision is taken on the basis short span of
time.
Year Project A Project B
Cumulative
cash flow of
A
Cumulative
cash flow of
B
1 30000 50000 30000 50000
2 45000 55000 75000 105000
3 95000 105000 170000 210000
4 80000 60000 265000 270000
5 55000 45000 320000 315000
Table 2: Pay back
Project A=4+(300000-265000)/55000=4.64 Years
Project B=2+(200000-105000)/105000=2.90 Years
As per the pack back period project B should be selected because here initial cost
can be recovered in less time span.
 Accounting rate of return- It is the another imperative method of assessing
viability of project wherein decision is taken on the basis of rate of return
(Hofmann and Lampe, 2013). It assist Connecting Venues to increase overall
rate of return by investment in the most portability project. It contribute towards
creating competitive edge of the firm at the marketplace.
Accounting rate of return of project A=61000/150000*100=40.66%
Accounting rate of return of project B=63000/100000*100=63%. According to ARR,
project B should be selected because rate of return is high for it. On the other hand
project A is giving comparatively less rate of return for Connecting Venues, hence
project B is more profitable.
 Net present value method -Net present value method is the imperative way
thereby management can come to know the actual cost of investment (Milner

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and Rosenstreich, 2013). It assist firm to start operation in short span of time.
Under this, the proposal which gives high net present value is accepted and
select in order to organize the event for the Connecting Venues.
Year Project A Project B P.V@ 10% Present value of A
Present value
of B
1 30000 50000 0.909 27270 45450
2 45000 55000 0.826 37170 45430
3 95000 105000 0.751 71345 78855
4 80000 60000 0.683 54640 40980
5 55000 45000 0.621 34155 27945
Total present
value 224580 238660
Initial
investment 300000 200000
NPV -75420 38660
Table 3: NPV of project
As per the net present value method project B should be selected because it is
generating high net present value. On the other hand, project A is giving negative return
for the company that shows that it is not worthwhile and management need to invest in
project B.
 Internal rate of return method- It is the another important method of assessing
viability of project wherein management of firm take decision on the basis of
rate of return (Verbeeten, 2011). The proposal which gives higher rate of
return is accepted among the available. It proves to be effective for effective
utilization of limited resource that aid to decrease cost of production and
increase overall profitability.
Year Project A Project B P.V @ 20% Present value of A
Present value of
B
1 30000 50000 0.833 24990 41650
2 45000 55000 0.694 31230 38170
3 95000 105000 0.579 55005 60795
4 80000 60000 0.482 38560 28920
5 55000 45000 0.402 22110 18090
Total present 171895 187625

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value
Initial
investment 200000 200000
NPV -28105 -12375
Table 4: IRR
Project A=10+(75420)/(224580-171895)*(20-10)=-4.31
Project B=10+38660/(238660-187625)*(20-10)=17.57
As per the internal rate of return method, project B should be selected because of
high rate of return. Here, project A has negative rate of return that depicts management
should go for project B.
Therefore, from the analysis, it can be said project B is the most profitable in term
of profitability as well as recovery of initial investment. It will prove to be effective fro
Connecting Venues to increase overall rate of return by organizing music event and
film festival.
CONCLUSION
From the report, it can be concluded that, financial management is the imperative
factor for increase profitability and managing all other business activities. It make is
possible for the firm to expand business and create competitive edge in the
marketplace. Furthermore, investment appraisal assist management to select the best
project in term of cost and profitability as well as time. It can also be said that, market
oriented price is the way to create distinctive image at the marketplace and also
delivering good quality of services to large number of customers.
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REFERENCES
Journals and Books
 Alegre, H., 2006. Performance indicators for water supply services. IWA
publishing.
 Allen, K. and Economy, P., 2011. Complete MBA For Dummies. John Wiley &
Sons.
 Bladen, C. and et. al., 2012. Events Management: An Introduction. Routledge.
 Bredgaard, O. and Pedersen, M., 2008. Financial Management. Academica.
 Broadbent, M. and Cullen, J., 2012. Managing Financial Resources. 3rd ed.
Routledge.
 Chang, J. F., 2005. Business Process Management Systems: Strategy and
Implementation. CRC Press.
 Emiliani, M. L., 2006. Origins of lean management in America: The role of
Connecticut businesses. Journal of Management History.
 Grewal, D. and et.al., 2011. Evolving pricing practices: the role of new business
models. Journal of Product & Brand Management.
 Distribution & Logistics Management.

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