Mfrd 1

Topics: Income statement, Balance sheet, Financial statements Pages: 11 (3049 words) Published: April 19, 2013

Identify and describe the various sources of finance available to Company3
The implication of the different sources of finance to Company related to risk, legal, financial and dilution of control, and bankrupt.4
Select the appropriate sources of finance for Company and make recommendations on the best ways of raising finance.6
Assess and compare various costs involved with each sources of finance8
Explain the importance of financial planning for Company9
The information needs of different decision makers11
The impact of finance on the financial statements12

Dong Kuang is a good friend of Paul Mottram the Executive Vice President, Asia Pacific. The company’s full service marketing and corporate communications network helps companies make the most of business opportunities in this vibrant, growing region every day. Corporation’s multicultural, multilingual; team has a ten-year track record of helping local, regional and multinational companies engage with a variety of stakeholders. Bite has presence in the major Asian markets, with offices in Bangalore, Beijing, Hong Kong, Mumbai, New Delhi, Shanghai, Singapore and Sydney, and affiliates region wide.

Acting as a financial project adviser to Kuang, my responsibility is evaluating the different sources of finance and providing information on the implication of finance as a resource in the business.

Indentify the sources of finance available to business
All businesses need money to start up and pay bills. Kuang needs more financial sources to support his company’s establishment in Vietnam. Depending on the size and development stage of business, the selection of appropriate sources of finance is important to success. Start up stage

In the initial stage, Kuang and Mottram can make use of some kind of financial sources below: Partnership, Co-founder (between Kuang and his friend – Paul Mottram, Executive Vice President of Bite Asia Pacific This is the most feasible solution for Kuang and his friend where they can be together to raise money from each person’s saving. Government loan “is a sum of money given to an individual or business for a specific project or purpose. A grant usually covers part of the total costs involved. However, as long as the individual or organization keep to any conditions attached to the grant, it will now have to be repaid”. The advantage of this source of finance is firms may not need to be repaid though spending closely checked. However, in Vietnam, it is very difficult and requires company to persuade the government. Issue shares: Kuang and Mottram can raise more money by issuing shares to shareholders (friends, families, etc). Issue shares can raise a large amount of money and it is never repaid, but it is for listed companies and only shareholders are paid dividends. Expansion stage

Bank loan is a debt, often with interest for a set period within an agreed repayment schedule. Often, bank offers this loan service is essential because almost businesses don’t have available financial resources they need to create a purchase. Kuang borrows £9,000 from the bank and he has to pay £375 interest per month. Retain earnings: This financial source is only carried out in the second year, when Kuang’s company has profitability. With the retain earnings, Kuang make decisions but it reduces dividend payments and companies must achieve a sound balance between dividends and retained earnings. Issue bonds: Kuang business can issue bond to borrow money from the investors. It means that the company has to pay the interest rate periodically on the bond at the purchase value until it’s mature. This solution is good for Kuang, because the company only pay the interest for investor without concerning company’s profit.

Assess the implications of different financial sources
When Kuang applies different sources of finance for different stages, each financial...
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