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Unit 15 Managing Business Activities to Achieve Results-Level 4-HND Business

University: University of Northumbria

  • Unit No: 17
  • Level: High school
  • Pages: 17 / Words 4147
  • Paper Type: Assignment
  • Course Code: N/A
  • Downloads: 4632

Table of Content

  1. Introduction


At the workplace of an organisation there are several numbers of resources are available and among them very significant are financial resources. When the organisation has the financial resources then it is highly necessary to manage them in appropriate way which will support to improve profitability at the year ending. Along with this, to take effectual decisions is also one of the key aspect and process of the company. In this the government of UK provide 3 Billion GBP extra amount up to the FY 2020 to those firms which operate at the small level. In the current study RL Maynard business entity is chosen which operates at the small scale in construction sector of the UK. When the company going to raise fund for expanding business then there are many financing sources are available which are analysed through present case. In the second part of the report it shows cost imposes by financing sources along with its effect the company's financial statements. At the task third there is cash budget. Cost and price of one unit are shown and analysed. At the end of respective report, various financial statements of Marriott International hotel are to be analysed on the basis of financial ratios.


1.1 Variety of source of financial available for RL Maynard company

External and Internal source are main source of finance they are:

External Source are source from which company arrange its financial need to run business. Finance is lifeline of any company without finance no business even can start. So Some External sources of finance are: Bank Loan,Equity Financing and personal savings.

Bank loan: If in any business financial needs arises entrepreneur go for business loan from banks. Interest rates are decent as compared to personal financing. last 3 yr balance sheet and property papers presented against loan manager for approval of business loan (The 12 Best Sources of Business Financing, 2010). There are few types of Bank loan are:

Bank loan on basis of guarantee: For businessman they should have proper plan and experience in particular field. Bank to secure itself against loan they take grantee from guarantor it could be anything like third person guarantor, security deposits or property papers is guarantee which banks demand. So for companies like RL Maynard which is construction company can represent property papers for approval of business loan..

Consortium Bank loan: If firm want huge amount then banks to minimise risk two corporate banks get together and approve a loan to owners.

Equity financing: It is source of financing where to raise capital company sells its equity to its investors. In need of finance company either opt for equity or debts. In equity financing to raise capital company sells a portion of capital in form of stocks to shareholders in exchange of cash. So for RL Maynard company its majority of financing is in equity stocks (Siano, Kitchen and Giovanna Confetto, 2010).

Personal Savings: Personal Savings are in form of Bank balance,Term deposits , Investments in property, Assets and properties.

1.2 Implications and impact of source of finance on RL Maynard


Financial Implications

Legal Implications

Dilution of control


Equity Source

Company have huge burden of cost of equity so if no. of shares is huge then dividend cost will also going to be high.

Company have to obey Stock Exchange rules and regulation they need to first list on stock exchange then after they can issue shares. They are abide by laws of Company act, in terms of capitalization, profitability etc (Hayre, 2015).

As no. of shares increase the power of shareholders dilute. Means ownership in company splits among shareholders.

In bankruptcy first company pay its creditors and banks, then after company is liable to pay preference share holder and lastly company pays to its equity share holders.

Bank loans

Cost of bank loans are also hight as file charges and interest rates are considered in it.

Banking norms and laws are included in it. Like possession, instalment payment rules and regulations etc.

No dilution of controls

No impact

Personal Savings

In personal savings, interest on saving is financial implications because it can be taxable.

No legal implications.

No dilution of control.

Same as above.

Consortium banking Finance

Cost of loans are generally higher and payment of interest are done towards involved 2 banks or more then two banks.

Rules and legal implication could be banking norms as per above and government.

Dilution of control are splits toward financial institution of joint banks (Baranov, 2015).

In bankruptcy impact on both banks seen. So it is risky for all involved financial institution or banks.

1.3 Evaluation of suitable financing sources

Bank loans and Equity Source are major source of financing in business world because they have the capacity to provide such a huge amount that no other source can generate the same.

Advantages Of Equity source of financing: Equity is major source of financing. From equity company can raise required capital by issuing stocks to its investors like equity share holder, preference share holder etc. Advantages are

  1. Finance can be generated in quick succession.
  2. No need to rely on banks and debts equity
  3. As company grow the profit of investors also grow.
  4. Outside investors can seek opportunity and they can help in growth of business and ideas.

Disadvantages of equity financing:

  1. Raising equity source of financing is demanding and costly and time consuming.
  2. Investors have the right to check past performance and deep interest in company profit (Salisbury, 2014).
  3. can lose decision making power depends on no. of investors.

Advantages of Bank Loans:

  1. It is best source of short term finance or medium source of financing.
  2. Exemption of tax can be gained as interest paid on loans under tax expenditure.


  1. Some banks charge prepayment penalty.
  2. Borrowing to much can leads to decrease in cash flow because instalment on monthly basis deposited in banks.
  3. Some Banks not sanction whole loans as they sanction below demanded.


2.1 Financing costs which are associated with different source of finance

  • Personal savings: It is the internal source of finance which is raised from those saving which are done by entrepreneur in his personal life. Due to this condition, any kind of costs and expenses are not comes into consideration at the workplace. Hence, it can be said that while using personal savings RL Maynard not need to pay any kind of costs.
  • Bank loan: The current source of finance take cost in form of interest amount which is higher as compare to another available sources (Kunreuther and et.al., 2013). When the RL Maynard going to raise and take capital from bank then it has to pay charges in form of the interests to commercial banks.
  • Equity financing: Through enhancing level of capital by issuing equity in the market RL Maynard limited company has to give cost in form of amount of dividend. The shares of the company are purchased by shareholders and cost is given to them from the amount generated by it. Higher the profitability ratios help to the firm to provide more amount of the dividend to potential shareholders.

2.2 Significance of the financial planning in context to RL Maynard

Financial planning is process of framing objectives and policies, procedure and programme and financial budget regarding business. Basic planning started for business. So adequate funds need to be ensured. It helps in insuring supplier of funds as easily investment in company which easily exercise financial planning. It insures adequate balance between outflow and inflow of fund so that stability is maintained. It helps in making growth and expansion of business that helps in long term survival of business (Greenbaum, Thakor and Boot, 2015). It reduces uncertainity which can be life saviour for business and growth of company. It gives stability and profit concern. Financial planning help in determining capital requirement as cost incurred in current and fixed assets, expenses and long term planning. It also helps in determining capital structure, it is composition of capital i.e. Need and available capital in business. This include Equity and debt ratio, both short and long term. Best significance of financial planning is framing plans and policies related to cash control, borrowing and issuing of capital i.e. Landing. It helps manager to maximum utilization of scarce capital and maximise profit in it.

2.3 Assessing those informations which needs at the time of taking financial decisions

There are many kinds of sources are available which provide financial services up to better level. At the time of allowing capital for expanding business such sources needs variety of informations and among all main information is related to the profitability (Lee and Lam, 2012). Because higher the ratio of profitability lead to pay the cost and amount of total capital within less number of years and in the smooth way. Here bank loan and equity financing are the source which can use d by RL Maynard. Here these needs information of firm in terms of liquidity position as well. The reasons are that higher the profit and liquid conditions support to pay more return to shareholders as well as fulfil debt obligations in short time.

2.4 Explanation regarding influences on financial statements of financing source

Income statement- When the management of RL Maynard enhance fund through varies financing sources then it has to give cost of them behind using financial services. Due to this reason, total expenses are increase which lead to create negative impact on the accounts of profit and loss. Moreover, the cost and expenses are made from the sales and profit generated in an accounting year which lead to reduce total profit. Financing cost is indirect expenses for the RL Maynard which paid from operating profit and then net profit gets reduce (MacDonald, 2012). Hence, it can be said that because of financing sources the income statement affects in the negative manner.

Balance sheet- When the company raising finance then it leads to enhance total capital level at the workplace which is positive impact in the liabilities side of B/S. In the liabilities section of statement of financial position total capital as well as total liabilities both will increase which is positive for RL Maynard. On the other side, in the assets side cash balance also improve and it is positive impact on current financial statements by which liquidity position will increase.


3.1 Formulating cash budget along with the analysis

The budget aspect supports to an entity for predetermine any kind of financial data and then make strategies and decisions according to that. Cash budget is the most widely used by RL Maynard in order to analyse future financial performance by determining incomes and level of outflows (Paul, 2013). Projected cash budget statement for the small business firm is formulated as below:

Formulating cash

The aforementioned table of cash budget clearly indicates that the company is not able to generate positive net cash balance at the end of every month. From the month of January to the end of June cash balance declines which is negative condition of the entity. From this it has been interpreted that RL Maynard's management is not efficient to improve incomes and sales by reducing various kinds of expenses. The budget shows business performance for the half yearly by presenting data of every month. By interpreting and analysing the formulated cash budget it can be suggested to the managers of RL Maynard that it needs to frame highly effectual strategies for attracting customers as well as controlling the expenses (Reay and Hinings, 2009). By this sales will improve along with cost declines which make more positive difference between inflows and disposals.

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3.2 Presenting calculation of cost and selling price of each unit or item

When the company produce and manufacture items and units then make the cost of unit by taking base of the whole costs which associated with business. On the basis of cost of every unit price to sale it in the market is to be determined using different strategies. Furthermore, calculation of such both the aspects is stated in the below section:

Presenting calculation

It has been ascertained from the above computation that to make the decision of cost of every building or house in RL Maynard firm fixed as well as flexible or variable expenses are added. After adding these all expenses total cost of the production is assessed which is in the current case worth of 60000 GBP along with 5000 units. It can be said by the respective analysis that the RL Maynard will sale its products worth of 14.6 GBP. There are variety of the strategies and techniques are available for make the price for sale the products and services (Greenbaum, Thakor and Boot, 2015). In current case, selling price is assessed with the help of cost plus pricing strategies at where profit which the firm wish to charge is added in the cost of one item.

3.3 Assessment of viability of the project through financial tools

While expanding the business in other market and country there are many projects are there and from that all anyone projects has to select to an entity. For this the management of RL Maynard use financial tools and then determine viability of one project among all. In this cortex, there are various tools used by firm which are such as net present value, internal and average rate of return, profitability index, payback and discounted payback period etc. In the current study, the RL Maynard adopt NPV as well as IRR method which is show as below:

Net present value

Net present value

Internal rate of return

Internal rate of return


Net present value (NPV) is a method which gives future value of initial investment by assessing all the factors associated with the project. Apart from this, internal rate of return indicates that project will give how much return at the end of project completion. From the above table of financial tools it has been assessed that from NPV the project will give 352866 GBP of the investment worth of 300000 which is made at initial level (Hodler, Luechinger and Stutzer, 2015). According to IRR method it will give 39.45% return at the end of five financial periods. By analysing these all it can be suggested to the RL Maynard firm that it needs to undertake the current project which will enhance its performance within construction segment of the country UK.


4.1 Elements of variety of financial statements

In the financial world there are many varieties of statements are prepared by firm which has different elements along with various purposes and objectives. Furthermore, such statements and accounts are analysed as below:

Income statement- The account and statement by which the management of the firm capable to asses and determine profitability condition in the industry is known as income statement. In there are mainly two kinds of elements are associated which are such as expenses and income side. Apart from this it shows three types of profits such as gross, operating and final or net. While making any decisions related to financial are taken on the basis of net profit only because in this all expenses are deducted (Baranov, 2015).

Statement of financial position (SOFP)- The current type of accounting book requires for an entrepreneur or entity to determine and calculate liquidity condition or position in the segment from where it earns money. In there are two key heading are analysed according to that accounting treatments are to be done which are such as assets and liabilities. In the liability side there is a main content is utilized which is total shareholder's equity which express amount and fund which is invested by shareholders after purchasing its stock ad equity shares.

Cash flow statement- On the basis of the respective type of statement the management asses cash position and condition in the market and sector. It has three key components or elements which are like as inflows or incomes, outflows or cash disposals and net cash balance. The third kind of element is calculated by making difference of the incomes and outflows (Dekker, Ding and Groot, 2016).

4.2 Comparison between format of key financial statements of different organisations

Sole trader- The company which operates in the industry without following any kind of legal rules and having fully ownership with the only one entrepreneur is known as sole trader. While making profit and loss account then here these kinds of companies not need to include taxation amount. In addition to this, there is not any need to prepare all the books of account and make the accounting treatments of each and every financial transactions.

Limited organisation- In the corporate world, when an entity follow all kinds of legal terms and conditions along with listing in the stock market is identified as limited kind of company (Greene, Brush and Brown, 2015). Such organisers when make and prepare profit and loss statement then it has to make accounting treatment of the taxation expenses. For these firms it is compulsory to prepare those books of accounts and statements which are associated with the accounting and financial world in appropriate and legal manner.

4.3 Interpreting financial statements of the Marriott International

In order to interpret and analyse financial statements there are variety of financial ratios are used by the business entity and on the basis of it effectual decisions are taken. In the current analysis Marriott International hotel is to chosen which operates at the global level in hospitality sector. Profitability and liquidity ratios of the hotel are calculated as below:

Kind of ratios

FY 2014

FY 2015

Profitability ratios


GP (Gross profit) ratio

14.25 %

14.66 %

NP (Net profit) Ratio

5.46 %

5.93 %

Liquidity ratios


Current ratio (CR)



GP (Gross profit) ratio

The level of profit at which only cost of goods sold (COGS) is to be subtracted from the revenue earned by it is known as gross margin. The company uses the respective profit level as a base for calculating operating and net income or level of the profit. From the aforementioned table it has been analysed that in the FY 2014 GP ratio is 14.25% which is increase in the further year which is like as 14.66%. On the basis of such output it has been said that firm utilize the stock and assets for generating sales and revenue along with managing the costs which are associated in selling of the accommodation and other services of Marriott hotel (Salisbury, 2014).

NP (Net profit) ratio

In the profit another variety is net or final which is derived by deducting and subtracting overall production and non production as well as direct and indirect costs from the turnover made by Marriott hotel. In context to this, the hotel generates more net profit due to which NP ratio increase from 5.46% to 5.93%. It can be clearly said that the management has efficiently utilized the resource along with attracting more users as well as reducing indirect kind of expenses. The managers of Marriott hotel needs to continue with the existing strategies by making some modifications which make it healthier in the industry in form of financials.

Current ratio (CR)

It is the type of liquidity ratio by which internal and external stakeholders can known capability of the hotel for paying amount of debt which is taken by external parties and sources (Reay and Hinings, 2009). In the current scenario of hotel it can be analysed that management of the entity unable to reduce debt amount which lead to reduce its capability to fulfil financial obligations. Profit goes higher but in opposite it has more high amount of debt compare to previous. This is the reason that current ratio goes shown from 0.63:1 to 0.43:1 from the accounting year 2014 to 2015. Hence, it needs to manage the debt and cost along with improving higher profit.


From the above analysis it has been ascertained that there are many kinds of the source are available which supports to the RL Maynard in order to improve and increase fund and capital within business to expand in other market. Apart from this, sources of finance which are used by the respective firm are take different costs which lead to make influences on the books of profit and loss or financial position. From the third task it has been found that cash budget is effective tool for the company to make the financial plan along with take effectual business decisions. It can be said that with the help of cost plus pricing method the RL Maynard takes as well as derive selling price of the buildings and property which it going to sell. It can be concluded that different types of companies has to follow different formats in order to prepare financial statements. On the basis of financial ratios it can be interpreted that Marriott international hotel is performing well in the hospitality industry of UK from previous year.


  • Baranov, P. A., 2015. Using risk-oriented approaches to solve information security problems. Automatic Control and Computer Sciences. 49(8). pp. 643-647.
  • Dekker, H. C., Ding, R. and Groot, T., 2016. Collaborative Performance Management in Interfinn Relationships. Journal of Management Accounting Research.
  • Greenbaum, S. I., Thakor, A. V. and Boot, A. eds., 2015. Contemporary financial intermediation. Academic Press.
  • Greene, P. G., Brush, C. G. and Brown, T. E., 2015. Resources in small firms: an exploratory study. Journal of Small Business Strategy. 8(2). pp. 25-40. Hay, A., 2015. Managing Financial Resources and Decisions. GRIN Verlag. Hodler, R., Luechinger, S. and Sturzer, A., 2015. The effects of voting costs on the democratic process and public finances. American Economic Journal: Economic Policy. 7(1). pp. 141-171. Kunreuther, H. and Hal., 2013. Risk management and climate change. Nature Climate Change. 3(5). pp.447-450. Lee, C. K. M. and Lam, J. S. L., 2012. Managing reverse logistics to enhance sustainability of industrial marketing. Industrial Marketing Management. 41(4). pp.589-598.
  • MacDonald, H., 2012. Managing the consequences of financial crisis: A long view of housing disposition. Housing Policy Debate. 22(2). pp.201-218.
  • Paul, K., 2013. Managing Extreme Financial Risk: Strategies and Tactics for Going Concerns. Elsevier.
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