UNIVERSITY OF TECHNICAL EDUCATION BTEC HND IN BUSINESS (MANAGEMENT)

ASSIGNMENT COVER SHEET

NAME OF STUDENT REGISTRATION NO. UNIT TITLE ASSIGNMENT TITLE ASSIGNMENT NO NAME OF ASSESSOR SUBMISSION DEADLINE

Unit 2: Managing Financial Resources and Decisions Finance as a Resource 1 of 2 Sumit Dhull 15th April 2013, 8am

I, __________________________ hereby confirm that this assignment is my own work and not copied or plagiarized from any source. I have referenced the sources from which information is obtained by me for this assignment.

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Unit Outcomes
Outcome Evidence for the criteria Feedback Assessors decision
First attempt Rework

Internal Verification

Identify the sources of finance available to a business

1.1

Understand the sources of finance available to a business LO1

Assess the implications of the different sources

1.2

Evaluate appropriate sources of finance for a business project

1.3

Analyse the costs of different sources of finance

2.1

Understand the implications of finance as a resource within a business LO2

Explain the importance of financial planning

2.2

Assess the information needs of different decision makers

2.3

Explain the impact of finance on the financial statements

2.4

Merit grades awarded Distinction grades awarded

M1 D1

M2 D2

M3 D3

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Outcome

Evidence for the criteria

Feedback

Assessors decision

Internal Verification

Assignment
( ) Well-structured; Reference is done properly / should be done (if any)

Overall, youve

Areas for improvement:

ASSESSOR SIGNATURE

DATE

NAME: ......................................................................................

(Oral feedback was also provided) STUDENT SIGNATURE DATE / /

NAME : .............................................................................
FOR INTERNAL USE ONLY VERIFIED YES NO DATE : ........................................................................

VERIFIED BY : ........................................................................ NAME : ........................................................................

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SCENARIO Phan completed his Diploma and wanted to start a business enterprise. He had different ideas in his mind. He came across an old text book about herbs and their medicinal properties. He developed ideas about using those herbs in developing new products. His idea was to introduce a new product, which would be good for health. He was thinking about giving it the shape of a brand. He knew that making a branded product and selling that as a popular brand is not an easy task. He studied many case studies on similar products and evolved different ideas about how he should produce. Phan has approached you as he is very keen on start his own business and he would like to know various sources of finance to support his business stated below. While going through these ideas, he had various options, which were based on his studies: Launch the product like a commodity - just like coca cola. Coca cola was also launched as a product sold by druggists initially. It took a long time for coca cola to reach to masses. Phan was thinking of giving his product a tinkering similar to Coca cola. It required huge amount of investment into the business. Phan have an idea to take two or three partners in order to launch his products. The second option was to launch it like a medicine. Medicines cant be advertised directly. They have to be marketed to the doctors directly - who will recommend it the patients. Here the option was to make it not strictly like a medicine. Phan have an idea to form his business operation as partnership then become a private limited company. Phan had idea to create a new marketing channel. During his prior studies in the Diploma programme, he had made presentations on terms like viral marketing, network marketing etc. Viral marketing is word of mouth marketing. Network marketing also relies on networking on people. Phan had an idea about introducing the product using similar strategy. He had seen success of AMWAY succeeding in network marketing. Similarly, he had seen his own institution AFTERSCHOOOL using viral marketing. Now he was not sure about which strategy to use. Phan knew that great products have failed in markets - he didnt want failures - he wanted a sure success and for this the only way was brainstorm and find the best option. Currently Phan is a sole proprietorship seeking seed money. Incorporation will be decided at a later date as investors are secured. He has estimated required capital is: sale of house 385,000 and redundancy payment of 68,000. Phan also estimated start-up cost requirements are as follows: Legal 1,000; Rent 2,000; Utilities 400; Telecom System 400; Insurance 300; Storefront Build-out 15,000; Expensed Equipment 4,000; Website development 1,000.

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Phan maintains a bank account showing a small credit balance and he planned to approach his bank for the necessary additional finance. He intends to start up in business on his own account, using 30,000 which he currently has savings. Phan asked your advice to prepare cash budget for October 2012 to March 2013 and provides the following additional information. They are as follows: Phan estimated to purchase a fixed assets costing 16,000 and intended to settle off at the end of September. Life of the fixed assets are expected are 5 years and have nil residual value. He also estimated stocks costing 10,000 will be acquired on the end of September and subsequent monthly purchases will be at a level sufficient to replace forecast sales for the month. Estimated monthly sales are 6,000 for October, 12,000 for November and December, and 21,000 from January 2013 onwards. He also fixed selling price at the cost of stock plus 50%. There are 2 months credit will be allowed to custo mers and he received one month credit from his suppliers of stock. Operating expenses, including rest, are estimated at 3,200 per month. Phan also planned to withdraw monthly cash as a drawing from his business amounted to 2,000.

Role You are acting as a financial project adviser to Phan evaluating the different sources of finance and providing information on the implication of finance as a resource in the business. You are to provide Phan a brief report on the following task. Tasks Identify the sources of finance available to Phan Assess the implications of the different sources of finance to Phan (1.2)
Hints: Discuss the implication, if any, of the corporate tax on debts financing for Phan? Explain the implications in both legal and financial aspects to Phan in issuing debts and equity shares to raise their capital? Is a corporate tax adjustment required when estimating the cost of Phan as Limited Company the ordinary shares? Discuss the dilution of control implications if of Phan as Limited Company decided to issue new shares which include ordinary shares and/or preference shares, to raise their required capital. Discuss the implication of failure to pay interests on debt and ordinary dividend from the perspective of Phan as Limited Company.

(1.1)

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Evaluate appropriate sources of finance for Phan

(1.3)

Hints: Explain the advantages and disadvantages of different sources of finance available to support the expansion of a selected business from sole trader to partnership, private limited company and public limited company. Evaluate different sources of finance appropriate to each expansion stage.

Analyse the costs of different sources of finance for Phan

Hints Evaluate various costs incurring with each sources of finance available to Phan.

(2.1)

Explain the importance of financial planning to Phan Assess the information needs of different decision makers Explain the impact of finance on the financial statements to Phan

(2.2) (2.3) (2.4)

Hints: Explain, using examples, how a business may manage inflows and outflows, P/L and B/S and explain how a business may manage its working capital. Analyse a cash flow forecast highlighting how a problem could occur and explaining why a business may encounter problems in managing cash flow. Think about overtrading, excessive borrowing etc. Analysis also the P/L and B/Sheet

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GRADING Pass is achieved by meeting all the requirements defined in the assessment criteria. (Refer page 2 of the assignment brief) Identify and apply strategies to find appropriate solutions (M1)

Merit

Characteristics / Possible Evidence Accurate evaluation of various costs of finance taking into consideration all the relevant variables and selected appropriate sources of finance for given situation. Select and apply appropriate techniques. (M2)

Characteristics / Possible Evidence Apply range of methods and techniques in analyzing the implications of alternative sources of finance, assess the costs using of various sources of information and description of all key components on spread sheet. Present and communicate appropriate findings (M3)

Characteristics / Possible Evidence report should contain clearly defined objectives, rationale and recommendations for appropriate sources of finance and are presented in a clear, structured format. Appropriate technical language is used. Appropriate use is made of text, images, charts and tables. Distinction Use critical reflection to evaluate own work and justify valid conclusions (D1) Characteristics / Possible Evidence Evaluate and synthesize relevant theories and techniques to generate and justify valid conclusions based on appropriate sources of finance, costs of different sources of finance as well as recommending steps to strengthen managing working capital. Take responsibility for managing and organising activities (D2)

Characteristics / Possible Evidence The various sources of finance, its costs implications and managing working capital to Phan are sufficiently discussed by examining their pros and cons. Demonstrate convergent, lateral and creative thinking (D3)

Characteristics / Possible Evidence The implications of the different sources of finance and management of working capital are analysed indepth by linking theory with the case study.

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PRESENTATION 1. The assignment should have a cover page that includes the assignment title, assignment number, course title, module title, Lecturer/tutor name and students name. Attach all the pages of a ssignment brief/cover sheet with your report and leave them blank for official use. 2. Ensure that authenticity declaration has been signed. 3. This is an individual assignment. 4. Content sheet with a list of all headings and page numbers. 5. A fully typed up professionally presented report document. Use 12 point Arial or Times New Roman script. 6. Your assignment should be word-processed and should not exceed 2,500 words in length. A CD should be included with references and accompanying notes. 7. Use the Harvard referencing system. 8. Exhibits/appendices are outside this limit. 9. The assignment should be not contain a bibliography but should contain a list of any references used in the assignment. NOTES TO STUDENTS FOR SUMMISSION Check carefully the submission date and the instructions given with the assignment. Late assignments will not be accepted. Ensure that you give yourself enough time to complete the assignment by the due date. Do not leave things such as printing to the last minute excuses of this nature will not be accepted for failure to hand-in the work on time. You must take responsibility for managing your own time effectively. If you are unable to hand in your assignment on time and have valid reasons such as illness, you may apply (in writing) for an extension. Failure to achieve a PASS grade will results in a REFERRAL grade being given. Take great care that if you use other peoples work or ideas in your assignment, you properly reference them in your text and any bibliography. NOTE: If you are caught plagiarizing, the University policy and procedures will apply.

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