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Introduction to Financial Resource & Decision making

Managing of the financial resources of the company is an important function as finance is the key factor on the basis of which entire business runs. Appropriate and effective management of the business leads to effective accomplishment of its goals and objectives (Bhowmik and Saha, 2013). In the current report Next Plc is chosen as company to access the different sources of finance and skills which are required for decision making on the basis available financial information.

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Further the report also includes the use of investment appraisal techniques and evaluation of financial performance of Next Plc. The company deals in the retail business of clothing, footwear and home products (Next Plc corporate, 2014). Next is listed on both London Stock Exchange and FTSE 100 and presently company operates more than 700 stores in many different countries of the world.

MANAGING FINANCE - PART 1

1.1 Sources of finance available to business

Next Plc can source the finance from internal and external sources of business. Internal sources of finance are availing the funds from within the organization. It can be accessed from the retain earning, selling of assets, working capital finance. But sourcing the funds from these areas can be used for smaller investments only as business cannot generate any huge amount of fund from its internal sources (Siano and et.al. 2010). The other option form which the Next can avail the funds are from external sources. Accessing the funds from these sources can be used for long term purpose.

Finance can be generating through bank loan and its overdraft facilities. Other source is from issue of shares in market through which company can access the large amount of finance from its investors. They can also avail the fund through issue of debentures in market and from this company has the option to generate the funds from both equity and debt market (Murphy and Yetmar, 2010). Company also has the option to create funds through assistance from government and also from its creditors and suppliers. External source is one of the best source from which business can generate a large amount of fund and can also use for longer term of period.

1.2 Implication of the different sources

Sourcing of funds from internal and external source has some implications in the business of the company. Generating the funds from the issue of shares will dilute the control of the company as it capital is increase. There will be increase in power of shareholders as they are also the owners of the business (Hansen, Mowen and Guan, 2009). On the other side issue of share will also increase the financial strength of the Next. At the time when the company avail the fund through banks and financial institutions, there will be chances of bankruptcy. The amount of loan is not paid on appropriate time or insufficient of fund will leads the business towards the bankruptcy (Flamholtz and Kurland, 2006). Generating the fund from debt will also require the business to pay their amount on installment basis. It will also affect on the liability of the company which may brings negative impact on the minds of stakeholders of organization.

1.3 Appropriate sources of finance for business project

Combination of funds that is accessing the finance from issue of shares and using of bank loan are the appropriate sources for business project. The reason behind using the funds from these external source is that the for the purpose of business project there is need of huge amount of fund (Nanda, 2004). Generating the fund from issue shares in the capital market will help the company to invest in its business projects. It will also increase the capital of the business. Next has to pay dividend to its shareholders at the end of every financial year. On the other side the sourcing the fund from bank loans will helps the business in future. Company does not have to pay the entire amount in collective way (Ho, Liu and Tsay, 2008). They have the option to pay this amount on installments. Combination of generating the fund for a business project is the best way for the investment in the business project.

2.1 Costs of different sources of finance

Availing the finance for the business involves different costs without which business cannot generate funds for its org

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