Managing Financial Resources and Decisions - Free Essay Example

Sample details Pages: 4 Words: 1253 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Research paper Level High school Did you like this example? Managing Financial Resources and Decisions Table of Contents Introductions-3 2.1 a) Calculation for the Cost of Ordinary Share Capital-3 2.1 b) Calculation for the Cost of Preference Capital3 2.1 c) Calculations for the Cost of Debenture Capital after Tax3 2.1 d) Calculation for the weighted average Cost of Capital of the company4 2.2 Importance of the financial planning4 2.3 Informational needs of Directors, Senior Managers and Junior Managers5 2.4 Impact of the financial statements6 Bibliography7 2.1 Introduction The financial Report is provided by Brian Harris Chartered Accountants to assist our client, X Limited, in understanding the results of financial condition and operations calculated in order to facilitate better and more effective decision making. 2.1 a) Calculate the cost of Ordinary Share Capital: Dividend Growth Model: Po =  £2 = 200 p Po=market price for each share Do = 10 p Do= Company payment g =8% = 0.08 g= growth rate in dividend 2.1 b) Calculate the Cost of Preference Share Capital: Pp =  £ 1.20 each Dp= annual dividend of preference share Dp = 12 % = 12/ 100 =0.12 Pp= market price of the preference stock Kp= cost of preference share capital 2.1 c) Calculate the Cost of Debenture Capital after tax: I = 10 %=  £ 1, 000 I= interest rate Taxation= 20% t =taxation Pd =  £125 Pd = price of debenture Kd= cost of debenture capital after tax 2.1 d) Calculate the weighted average cost of Capital of the company: . Don’t waste time! Our writers will create an original "Managing Financial Resources and Decisions" essay for you Create order MV (market value) CDC % OSC (Ordinary share capital) 2000 x 2 =4000 13.40 PSC ( Preference share capital) 1000 x 1.20 = 1200 10.00 D (debenture) 125% x 1000 = 1250 6.40 COC (cost of capital) 6450 WACC= WACC= 2.2 Importance of financial planning The financial plan is considered by all marketers the cornerstone or the spine of the business, without the company cannot run properly and profitably. So there are some important points that need to be followed to understand why the financial plan is important and how it helps the business. First of all, a plan is put in place in accordance to the goal the business has set and is working to reach those goals. For instance, the income in the business can be administered better, between the tax payments, any expenditures and even savings. The cash flow can be controlled and budgeted properly in the businessà ¢Ã¢â€š ¬Ã¢â€ž ¢ favour. A raise of the cash flow means a raise of the capital; that will help with investing in the business to increase the financial situation of the business. With an appropriate financial plan, proper investments can be chosen to adapt to the tasks and goals of the business. Also, the investments are useful for educational reasons, can be used to train the staff, or in times of emergency. The financial plan needs to include: a completed and up-to-date balance sheet, income statement and cash flow forecast; without all of those, the business will not be able to persuade any lender for a loan or any other financial assistance the business will need in the long-term. Secondly, the financial plan helps the business to determine the assets that can become a worry in the future because of the liabilities they come with. The assets are very important for the business; they can determine the solvency of the company. In the third place the financial plan that includes a proper insurance coverage is a worry less for the ownerà ¢Ã¢â€š ¬Ã¢â€ž ¢s family protecting their investment. All the saving, created because of the good planning, can be benefic in crucial times. To put together a proper financial plan, the business owner should seek guidance and assistance from a financ ial advisor, who will assess the financial situation of the business and can evolve a strong financial plan that should meet the businessà ¢Ã¢â€š ¬Ã¢â€ž ¢ objectives and goals. 2.3 Informational needs of Directors, Senior Managers and Junior Managers The executive of the company, responsible with the strategic and tactical management of the business is formed by the directors, senior managers and junior managers. The director (or directors of each department in a large company) is responsible with the strategic management. He needs large amount of information from a broad range of sources: markets, products, competitive environment, supply chain, new technology on the market, and about personnel and Human Resources, ready for a very good decision making. The director must acknowledge what information or raw data is needed to rule efficiently the company. Senior managers are responsible with the tactical management in the company, monitoring operations and finances. T here are five demanding areas that are in the senior managersà ¢Ã¢â€š ¬Ã¢â€ž ¢ attention: The public policy perspective related with informing the stakeholders and public about the important issues of the day Client perspective-related with people that sponsor work in the company, or those that make arrangements about pilot projects, researches and other type of projects, and how to meet their expectations. Internal business perspective refers at managing successfully any activities based on communication with staff, researches conducted in the company. The Innovation and Learning perspective refers at the training the staff should take to reach the skill level that is in accordance with the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s policies, to work efficiently, and how to overcome the cultural barriers in the company, by building the inclusive culture. The Financial Perspective à ¢Ã¢â€š ¬Ã¢â‚¬Å" refers at the rising funds that are imperative to support the researches are made by the company, and controlling and managing in an efficient way the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s resources. Junior Managers are part of the projects and support their senior managers in their operational responsabilities, collecting data and analyse the results, handling interviews with clients from inside the company, presenting the analysed results of the collected information in front of the project manager and the whole team; they can even lead projects when they have the necessary experience. 2.4 Impact of finance on the financial statements Financial statements make the support for understanding the financial position and performance, and also the liquidity of a business. They are considered like a map that gives a good direction to achieve the objectives of the business, and also to attract new investors. Financial statements refers at: income statement, balance sheet, cash flow statement, statement of changes in equity, an annual report, a 5 years report and summary of financial data, financial report, stock prices, auditorsà ¢Ã¢â€š ¬Ã¢â€ž ¢ report, accounting policies, management discussion and analysis, just to name the most important ones. The business must collect correct financial information, must process it in different financial statements and then issued them regularly to the investors of the company. Because it has a huge impact on the future of the business, all the information in the statements must be accurate. Financial statements can have a radical effect on the Stock Price. The investors take the information released on the financial statements and make assumptions about their investment decisions. Depending how the information on the financial statements is presented, the Stock Price can go up or down. A dramatic effect the financial statements can have on the Financial Decisions, on how easy is for the business to get financing. The lenders want to invest in the businesses with good figures, so they look at the financial statements before they lend money to the company. If the financial statements are not favourable, the effect is negative, resulting in no loan borrowed by the company. Good figures in the financial statements will attract New Investors. They are interested in new shares of stock issued from the companies with very good earnings. After a thoroughly examination of the financial statements, the new investors can determine if is a good investment to put money into a company, or not. Bibliography https://www.agualtiplano.net/the-financial-plan.php https://www.blueshorefinancial.com/ToolsAdvice/Articles/FinancialPlanning/TenReasonsWhyFinancialPlanningIsImportant/ https://www.ukessays.com/essays/finance/sources-of-finance-and-impact-on-financial-statements-finance-essay.php https://smallbusiness.chron.com/impact-financial-statements-23794.html https://gbr.pepperdine.edu/2010/08/what-directors-need-to-know/ Carmen Parolea-MogaPage 1

Regulations And Or Laws A Business Must Follow - 1214 Words

Miranda Carpenter 17 February 2015 Mrs. Nagle Report #1 In today’s society there are many regulations and or laws a business must follow. Every day there are businesses that â€Å"cut corners† but there are also some businesses that are charged by the law, due to illegal practices. Two businesses/companies that have been charged with unethical and illegal practices within the past two years are ExxonMobil which is the world’s largest energy company and FedEx which is one of the world’s top carriers (Diaz-Shephard, 2013). In 2013, Exxon Mobil Corp. was charged with dumping more than 50,000 gallons of waste water in Pennsylvania. The waste water was coming from the Marquandt well sites waste tanks, located in Pennsylvania’s Lycoming County. As Inspectors from the States Department of Environmental Protection began their unannounced investigation, they discovered that a plug had been removed from the tank which was what allowed the waste water to exit the tank onto the ground, polluting a nearby stream. Furthermore, Exxon Mobil then was ordered to remove 3,000 tons of soil as part of the clean project (Diaz-Shephard, 2013). Pennsylvania’s attorney general website Bloomberg.com stated that â€Å"natural gas wastewater may contain a number of toxins, including chlorides, barium, strontium, and aluminum†. This company was charged with five counts of unlawful conduct under the Clean Streams Law, and also charged with three counts under the Solid Waste Management Act (Kennedy, 2013). 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Agriculture and Industrialisation Free Essays

The topic of agriculture and its role in industrial and urban development has long been studied by economic theoreticians. According to Nam, Dang and Hainsworth (2000), there are three important theoretical schools that have been particularly influential after World War II, and which differ considerably in the ways by which each presents the relationship between agriculture and industry, in regards to the process of industrialisation. These are: â€Å"the role of agriculture in industrialisation†, â€Å"‘big leap’ into industrialisation and urbanisation†, and â€Å"harmonious links in the development process† (Nam, Dang, and Hainsworth, 2000, http://www. We will write a custom essay sample on Agriculture and Industrialisation or any similar topic only for you Order Now idrc.ca/geh/ev-33149-201-1-DO_TOPIC.html). In 1965, John Mellor and Bruce Johnston reported that a successful agricultural sector is an important element in the industrial development and rapid growth rate of a nation’s economy. According to Johnston and Mellor, the five key roles of agriculture are:  ·Ã¢â‚¬Å"to supply cheap foodstuffs and raw materials for the urban/industrial sector†;  ·Ã¢â‚¬Å"to export farm products to earn foreign exchange which could be used to finance technological and material imports for urban and industrial development†;  ·Ã¢â‚¬Å"to release labour to provide the work force for the industrial sector†;  ·Ã¢â‚¬Å"to expand the domestic market for industrial products†; and  ·Ã¢â‚¬Å"to increase domestic savings to be used to finance industrial expansion† (Nam, Dang, and Hainsworth, 2000, http://www.idrc.ca/geh/ev-33149-201-1-DO_TOPIC.html). Also in 1965, Simon Kuznets verified the role of agriculture in industrialisation by way of commercial transactions. According to Kuznets, the agricultural sector supplies other sectors within and outside the country with products such as â€Å"foodstuffs, industrial raw materials, labour, capital, and markets† that are necessary for industrialisation (Nam, Dang, and Hainsworth, 2000, http://www.idrc.ca/geh/ev-33149-201-1-DO_TOPIC.html). But despite the fact that these authors emphasised the importance of agriculture, their hypotheses also highlighted the need for a restructuring of the national economy, decreasing the share of the agricultural sector in the GDP (gross domestic product) and in the work force, and boosting the industrial sectors. Developmental strategies were usually geared towards the maximum utilisation of agricultural resources to augment industrialisation and urban expansion. In the matter of utilising agriculture to support industrialisation, the existing theories were unable to provide insight into how this can be made possible. La Grande Encyclopedie Francaise stated in 1986 that â€Å"The industrial revolution is accompanied by a general urbanisation and the gradual death of rural civilisation† (Nam, Dang, and Hainsworth, 2000, http://www.idrc.ca/geh/ev-33149-201-1-DO_TOPIC.html). In 1992, Hainworth observed that the conventional economic theories of the West, as established from the development of the UK and other European nations as well as the rapid industrialisation of North America, often places the agricultural sector in the position of â€Å"Cinderella† or slave to the indulgent â€Å"ugly stepsister† demands of industrialisation. In W.W. Rostow’s The Stages of Economic Growth, the author affirms that Western countries have achieved such advanced stages of development that their experience should be emulated by other countries. According to Rostow, the growth of an agricultural sector in an industrialising setting should be carried out concurrently based on four approaches: â€Å"economic, spatial, sociopolitical, and cultural – industrialisation, urbanisation, internationalization, and Westernisation†   (Nam, Dang, and Hainsworth, 2000, http://www.idrc.ca/geh/ev-33149-201-1-DO_TOPIC.html). Somewhat akin to this viewpoint are the opinions of several Western theorists in A Future for European Agriculture. Their theories tended to downplay the role of agriculture in industrialisation. According to them, the agricultural sector in Europe is primarily geared only towards the production of food. Thus, on the road to industrialisation, the only way to preserve economic growth is to considerably trim down the agricultural work force. As a rule, an impartial cutback on the agricultural work force and an augmenting of the industrial and urban-services labour force are expected trends in countries undergoing the process of industrialisation. Nevertheless, it is also important to remember the aforementioned key roles of agriculture. Another vital aspect not to be forgotten is that a country cannot simply make a â€Å"big leap† from being primarily agricultural into instantly becoming industrialised. There are stages between the two that simply cannot be bypassed, as evidenced by the experiences of developing countries in Latin America, Asia, and Africa. Owing to lack of consideration for the agricultural sectors, there have been instances where the negative ramifications of rapid industrialisation have been felt in some countries. In certain African, Asian, and Latin American nations, the consequences of making a â€Å"leap† towards industrialisation have included widespread shortages in foodstuffs, sudden migrations into urban centres that have led to poverty and overpopulation, and abrupt scarcities in the necessary products for industrialisation. British economist E.F. Schumacher, in his 1973 publication Small is Beautiful, stated that for true economic development to be attained, â€Å"an entirely new system of thought is needed, a system based on attention to people, and not primarily attention to goods† (Nam, Dang, and Hainsworth, 2000, http://www.idrc.ca/geh/ev-33149-201-1-DO_TOPIC.html). He postulated that sufficient attention on the agricultural sector must be paid, especially in developing countries where the majority of the economy is dependent on agriculture and where the bulk of the work force is in the agricultural profession. How to cite Agriculture and Industrialisation, Papers