Managing Financial Resources and Decision Ii

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Acknowledgment

First and foremost I would like to thank the Lord for the wisdom and skills bestowed to me that enabled me to successfully complete this report to the best of my abilities. Secondly, I would like to thank my lecturer Mr. XXXXXX for his vital encouragement and support towards me in conducting my research for this project. I would also like to extend my gratitude towards my family and friends who helped in making the completion of this report a possibility. Table of Contents

Page

Executive Summary 1

Statement of Originality of Submitted Work 2

Task One: Budgets

1. Types of budgets 3

2. Analysis of the various uses of budgets 8

3. Benefits of budgeting 10

4. Limitations of budgeting 11

Task Two: Unit Costs 12

Task Three: Pricing Decisions 18

Task Four: Investment Appraisal

1. Net Present Value (NPV) approach 22

2. Internal Rate of Return ( IRR) approach 23

3. Payback period 25

4. Accounting Rate of Return (ARR) 25

Task Five: Financial Statements

1. Main financial statements used by organisations 27

2. Differences between financial statements of various businesses 36

3. Ratio Analysis 37

Conclusion 46
Appendices 47

References 51
Executive Summary
The objective of this report is to introduce the ways in which to evaluate different sources of finance, compare the ways in which they are used and how best to use the financial statements to make decisions in a company.

The report will commence by the introduction of budgets as a planning tool for a company. The various types of budgets used by organisations and their various uses have also been identified and analysed in this report.

The second task of this report has been to identify what unit cost is, the two different components of unit costs and the factors that a company needs to consider when deciding the unit costs of its product for a period.

Also included in this report is the various decisions a company has to make in terms of pricing its products. The relevant decisions that a company needs to gather and assimilate in order to make good pricing decisions are also explained in this report.

The fourth task in this report deals with the techniques available to a company to evaluate various investment opportunities. Several investment appraisal techniques are discussed and their limitations are identified.

The last part of this report, task five concentrates on the financial statements prepared by the different organisations. the purpose of preparing financial statements are explained and the different types of formats used by different business organisations have been described. The financial statements of two fictitious companies have been drawn up and a ratio analysis has been conducted as a means of comparing the performance of the two companies.

Statement of Originality of Submitted Work

I; ……………………………………………………………………

Student Id No……………………………………………………..

Module Name…………………………………………………..

I hereby confirm that the work presented here in this report and in all other associated material; is wholly my own work. And I agree to assessment for plagiarism

Signature: ……………………………………………………....

Date: ………………………………

Task One: Budgets

A budget is a financial document used to project future income and expenses. It is a detailed plan of operations that is predetermined for a particular period. The budgeting process may be carried out by individuals or by companies to estimate whether the person/company can continue to operate with its projected income and expenses.

A budget may be prepared simply using paper and pencil, or on computer using a spreadsheet program like Excel, or with a financial application like QuickBooks.

The process for preparing a monthly budget...
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