Managing Financial Resources and Decisions Assignment 1 BTEC Nguyen Huu Phong 2017 tại University of Greenwich Viet Nam, đây là một trong những môn rất quan trọng và cần thiết cho những người muốn theo nghành businness cụ thể là human resource management như mình. Bài assignment này được mình làm tại trường. Các bạn có thể xem và tham khảo nhưng lư
ASSIGNMENT FRONT SHEET Qualification BTEC Level HND Diploma in Business Unit number and title H/601/0548: Managing Finance Resources and Decisions Assignment due Assignment submitted Learner’s name Nguyễn Hữu Phong Assessor name Learner declaration: I certify that the work submitted for this assignment is my own and research sources are fully acknowledged Learner signature Date Grading grid P1.1 P1.2 Assignment title P2.1 P2.2 P2.3 M1 M2 M3 D1 Sources of Finance D2 D3 In this assignment, you will have opportunities to provide evidence against the following criteria Indicate the page numbers where the evidence can be found Assessment criteria Expected evidence Task no LO1 Understand the sources of finance 1.1 identify the sources of finance available to a business 1.2 Assess the implications of the different sources Summary all available sources for this specific firm - Explain why other sources are not available for this firm Discuss on each available source of finance to the firm- Identify the advantages and disadvantages of each source 1.1 1.2 LO2 Understand the implications of finance as a resource within a business 2.1 analyze the costs of different sources of finance Analyze tangible and opportunity costs, and tax effect of each source of finance 2.1 Assessor’s Feedback 2.2 Assess the information needs of different decision makers Summarize all the information needs for financing decision required by Managers (Including Financial and Non-financial information) 2.2 2.3 Evaluate appropriate sources of finance for a business project Make decision on sources of finance–explain the reason for choosing a specific source of finance for this project using a wide range of criteria 2.3 Assessment criteria Merit descriptor No (M1) Merit descriptor No (M2) Merit descriptor No (M3) Distinction descriptor No (D1) Distinction descriptor No (D2) Distinction descriptor No (D3) Expected Evidence Feedback (note on Merit/Distinction if applicable) Identify and apply strategies to find appropriate solutions Select/design and apply appropriate methods/techniques Present and communicate appropriate findings Use critical reflection to evaluate own work and justify valid conclusions Take responsibility managing and organizing activities Demonstrate convergent/ lateral/ Creative thinking Summative feedback Assessor’s Signature IV Grading Check: Date Comments if any: Agree Disagree Modify grade to IV Signature Date Contents Introduction LO1 Understand the sources of finance 1.1 Identify the sources of finance available to a business 1.2 Assess the implications of the different sources LO2 Understand the implications of finance as a resource within a business 2.1 Analyze the costs of different sources of finance 11 2.2 Assess the information needs of different decision makers 2.3 Evaluate appropriate sources of finance for a business project Conclusion 14 References 15 12 14 Introduction A business wants to exist and to develop that it based on the rational decision of the leaders in the business To give the decision that the leaders need the solid knowledge of financial resources in the business Understanding financial sources inside and outside the business will help make the most appropriate decision to bring about optimal profit Report post here will help us better understand the definitions, financial analysis and the source of costs in the business and from sources outside investments LO1 Understand the sources of finance 1.1 Identify the sources of finance available to a business Accounts payable Accounts payable is an accounting item expresses the entrepreneur's obligation to pay all of its short-term debt to creditors Short-term debt is the debt that businesses have to pay during the period from year back down The term AP not only limited using for business finance At the household level, we will also have to pay the Bill of goods the consumer service monthly For example, the money of phone, water, gasoline Each company provided services will provide service before, bills are sent once we have used Each request for payment of invoices shall be paid immediately If the individual or company that does not pay its bills will be considered insolvent Short term loan Short term loans term loans are charged within a production cycle of the normal business or within a financial year and it is in contrast to the term loans long term This may be the proceeds of the loan, Bank loan organizations, or individuals in and outside the business Short-term Loan account in accounting to reflect the short-term loan amount and loan repayments situation of the business Your short term loans are shown on the balance sheet include the short-term debts, accounts can pay accumulated debts, and other types of debt Long term loan Long-term loan consists of loans and financial obligations lasting over one year The long-term loan for a company would include any financing or leasing obligations that are to come due in a greater than 12month period Long-term loan also applies to governments and nations can also have long-term debt Bond Bond is simply a loan company The loan portfolio by buying bonds of which the company released In return, the company will pay interest for the period predefined periodically (usually annually or semiannually) and to repay the principal at maturity, termination of debt Owner Equity Owner Equity is owned by business owners and members of the joint venture company or the shareholders in the company Retained Earnings Retained Earnings is not used to pay dividends that are retained to reinvest according to strategic goals or to pay the debt Profit retained is shown under the owners ' equity in the balance sheet Retained profit is calculated by adding the profit retained (the previous year) and net income minus dividends paid to shareholders Retained Earnings (RE) = Beginning RE + Net Income – Dividends In most cases, the company retained profits to invest in areas where companies can generate good growth opportunities, such as buying new equipment or spend more money for research and development (R & D) 1.2 Assess the implications of the different sources Short –term debt Advantages Disadvantages Short term loans usually require the standard of comfort and lightness over the loans of the banks or other lending sources in the Government High interest rates have a major disadvantage The interest rate of shortterm loans is usually much higher than long-term loans The approval and fast is a trait that the company or business often interest The approved short term loans usually take place quite rapidly from a few hours to a few days Long – term debt Flexibility in the balance when the Interest on debt is permanent burden to the capitalization of capitalization major business company Company has to pay the interest to bondholders or creditors at fixed rate whether it earns profit or not It is legally Bondholders are creditors and have liable to pay interest on debt no interference in business operations because they are not entitled to vote Debt usually has a fixed maturity date Therefore, the financial officer must make The company can enjoy tax saving on provision for repayment of debt interest on the debt Debt is the most risky source of long-term financing Company must pay interest and principal at specified time Non-payment of interest and principal on time take the company into bankruptcy Only large scale, creditworthy firm, whose assets are good for collateral can raise capital from long-term debt Equity No Interest Payments - You not need to pay your investors interest, although you will owe them some portion of your profits down the road Lost part of the control of business when the investor owns so much stock in the business Every decision is not exclusively in the hands of founders which will be decided based on who owns the No Liability – If the business doesn’t investment shares succeed, the investors are the ones who take the hit No Monthly Payments - You probably won’t need to make monthly payments until you make a profit – which keeps more cash in your pocket while you get things up and running Bonds Bonds tend to rise and fall less Historically, bonds have provided lower dramatically than stocks, which long-term returns than stocks means their prices may fluctuate less Bond prices fall when interest rates go up Certain bonds can provide a level of Long-term bonds, especially, suffer from 10 income stability Some bonds, such as U.S Treasuries, can provide both stability and liquidity Accounts payable Retained Earnings price fluctuations as interest rates rise and fall Tighter document controls Error reporting Better resources Exception processing Easy procedure documentation Duplication issues To help the company increase the value on the stock market, solid financing for a company that helps companies develop and bring the source of dividends to investors Low dividend rate and shareholders not benefit in full from the income of the company Easily influenced to value the market when business activity does not meet the expectations of investors LO2 Understand the implications of finance as a resource within a business 2.1 Analyze the costs of different sources of finance Tangible Cost A quantifiable cost related to an identifiable source or asset Tangible costs represent expenses arising from such things as purchasing materials, paying employees or renting equipment Example: Customers who bought a faulty phone at a mobile phone shop and this error due to the mobile phone shop Mobile phone shop must compensate the cost value of the phone to the clients, this is considered tangible costs On the other hand the client unhappy and complained about the quality of the mobile phone shop for friends or anyone else, the phone shop's revenue will be affected and this also considered intangible costs Opportunities Cost Opportunity cost is a useful concept used in the theory of choice It is applied very frequently and widely in economic life Opportunity cost based on the facility's scarce resources should compel us to make 11 choices Choice i.e perform trade-off, i.e to receive a benefit that would compel us to Exchange or overlook a certain cost to it As such, the opportunity cost of a choice is the value of the best overlooked when making the choice (and is losing benefits when choosing this approach that does not choose other; Selected other projects might be better option selected) Due to the rules of scarcity should always exist the trade-off when making the choice Or in other words, the opportunity cost always exists Example: You quit a job at a software company with a salary of $ 5,000 per month to go to the sale of clothing, one month you only got $ 3,000 profit 5000USD you bypass is considered the opportunity cost Tax Shield Tax shield (tax shield) is a term that economists talk about reducing corporate income taxes payable to the State by reducing taxable income In other words, before the tax shield, corporate income taxes are collected from enterprises is more than when businesses have tax shield Tax shield reduces the payment of taxes to the State and increases the assets to shareholders and creditors Example: a business investing in a project with the total amount of capital is 400 million VND Income before tax and interest of the loan is 100 million VND With the enterprise income tax is 28%, we see: + Business case does not borrow money to invest that use only the internal capital resources: taxable income is 100 million VND, corporate income tax payable is 28 million VND + Business loan case 400 million VND to invest, with the loan interest rate is 10% of loan interest rates: by 40 million VND, so it should the taxable income is 60 million VND Corporate income tax payable now only 16.8 million VND Tax shield in this case has a value: 400 million VND x 10% x 28% = 11.2 million VND 2.2 Assess the information needs of different decision makers Financial information • Balance sheet: Is a financial report including the company's current assets, liabilities, owner's equity company in a specific moment The balance sheet adheres to the following formula: Assets = Liabilities + Shareholders' Equity 12 • Income statement: Is report business results are important because they demonstrate the profitability of a company in period certain accounting Accounting period in the report was selected by the enterprise and can be changed The main point in the financial statements is that it represents the revenue, expenses, profits and losses, but it does not reflect the amount that companies receive or the amount that companies spend • Cash flow: Cash flow is a term that refers to the amount that a firm received or paid during a defined period of time, or in a certain project Cash flow statements is statistics of the cash flow of the business, is one of the three most important financial statements of enterprises This report is used to determine the level of sustainability in the short term of the business If cash increases (positive operating cash flow) then it will increase liquidity for the company, ready to meet the demand for cash Non-financial information • Press release: A press release is a short text, it is usually just one page, aimed at calling for awareness and attention to an event or an issue worth your company's news Press releases are sent to all types of press information: print, radio, and television If this press notice is the media for is actually have news value, it can bring to a significant awareness of the public about events and issues of your company • Vision and Mission Mission often focus on the present Handle the current problem, clearly defined customer, the implementation process, and activities necessary for the company to deploy Vision is often focused on the future It describes the next direction of the company to catch up and meet the market and sectors are trading In addition, proper vision can make company leading the trend and strong growth For example: Tiki’s mission and vision as follows: - Vision: "Become an e-commerce company not only goods but also the services Change the way everyone's shopping in the future" - Mission: "Meet the needs of online shopping in Vietnam Facilitate quick, convenient, secure online shopping" 13 The users of financial information Internal: Managements, Employees, Owners Used to analyze and improve the company's business situation, analyze the feasibility and profitability of investment houses, giving the future direction for the company External: Creditors, Tax Authority, Investors Feasibility analysis for investment and corporate, determine the level of reliability of the company based on the tax 2.3 Evaluate appropriate sources of finance for a business project I have a small project is to set up a software technology company with products is an English learning application using AI to help people learn more easily After many of our calculation then the amount we have to invest in order to implement the project is about 500 million VND However, due to our initial capital only 320 million VND so we don't to sufficient funding The calculations showed that the amount of money we need to add is about 180 million VND We decided to bank loans to carry out this project Through analysis we found was that the Bank really bring some benefits for my project Specifically, I will have to be large and fast capital initially Besides, the loan is due, we will not lose the right to decide in its projects as work thanks to funding from investors I have the right to property and the freedom to decide to grow and develop your business The Bank loans are also beneficial as it helps us reduce the tax money down because the interest is tax deductible This is also a benefit of loans instead of taking the entire funding of itself Conclusion To the business activities of a business and then develop fluency, leaders need to know and understand the financial resources that existing businesses as well as the financial resources from outside to make the decisions The ability of financial analysis, cost and other resource factors are the key factors in success 14 References Grasshopper (2017) The Pros and Cons of Equity Financing, Available at: http://grasshopper.com/resources/business-equity-for-entrepreneurs/equity-financing/ (Accessed: 19 May 2017) Accountlearning (2017) Advantages And Disadvantages Of Long-Term Debt Financing, Available at: http://accountlearning.blogspot.com/2013/01/merits-and-demerits-of-long-term-debt.html (Accessed: 19 May 2017) Wood, M (2016) The pros and cons of short-term debt, Available at: https://www.carbonite.com/en/cloudbackup/business/resources/carbonite-blog/the-pros-and-cons-of-short-term-debt/ (Accessed: 19 May 2017) Saga (2014) BASIC KNOWLEDGE ON BONDS, available at: http://www.saga.vn/5-kien-thuc-co-banve-trai-phieu~31678 (Accessed: 19 May 2017) 15