Unit 2 Managing Financial Resources and Decisions Assignment Copy 1

Unit 2 Managing Financial Resources and Decisions Assignment Copy 1

Unit 2 Managing Financial Resources and Decisions Assignment Copy 1


Diploma in Business

Unit Number and Title

Unit 2 Managing Financial Resources and Decisions 

QFC Level

Level 4


In organisation there are various department and these department get managed by the efficient management team. Among the roles and responsibilities of the management the managing finance resources and decisions is their prime role. Because if they fail to manage their finance they can't survive for a longer time period. In order to understand the things deeply Radisson Plc. is taken into consideration and different measures get covered in this report. Discussion will be made over financial planning, budgeting, and many more in order to manage the financial resources and decisions.

Unit 2 Managing Financial Resources and Decisions Assignment Solution

Task 1

A. Identify the appropriate sources of finance available for the selected business for its operations and assess the implication of different sources.

There are different and numerous appropriate sources of finance available for Radisson plc for arranging their funds in order to expand their business and some of them get discussed below such as:





Bank loan

Radisson plc arrange the funds by letting down securities in the form of loan.

  • Funds get raised easily by providing security.
  • It increases creditability in market.
  • Payment failure directly results into bankruptcy.
  • Interest need to pay on regular intervals.


Radisson took the capital nature products on lease such as machinery.

  • they make diverse use of available funds.
  • It didn't block the huge funds.
  • Radisson plc didn't get the ownership.
  • need to pay regular rentals.

Equity capital

They make issue of shares.

  • It helps in getting huge funds.
  • No need to repay gathered amount.
  • Ownership get shared among the shareholders.

Bank overdraft

Radisson plc make overdraft in order to make emergency payments.

  • It is short term and effective finance.
  • Payments get made quickly.
  • Short time period option for making payments.
  • Failure of payment results into bankruptcy.

Venture capital

Different investors make investment in their business expansion plan.

  • other investors helps in business expansion.
  • Huge funds get arranged.
  • Profits or ownership get shared with venture capitalists.

Retained profits

Radisson plc make use of their saved funds in order to expand their business.

  • They didn't create any liability.
  • Available liquid funds get decreased.

(Deegan, 2016)

Implications over the discussed sources of finance such as:






Bank loan

No control get diluted with bank.

Bank file legal case if they can't repay loan amount.

High level of risk is there as failure of payment make Radisson plc bankrupt.

Huge funds rendered by bank to support business expansion plan.

Equity share

Shareholders get the ownership and overall control get diluted with them.

Legal files and issues get satisfied before issuing shares in public.

There is no risk because shareholders become owner of the company.

Huge funds is received as shares get purchased by number of shareholders.


Radisson get the required equipment on lease and there is no control dilution takes place.

Lessor and lessee sign an legal agreement before starting lease.

There is a subsequent level of risk as both of them sign legal agreement.

Required items get arranged and available finance utilised in diverse forms.

Bank overdraft

Radisson repay the overdraft amount so that bank didn't get any controllership.

Bank took strict decision in case of payment failure as Radisson plc can be declared as bankrupt if they fail to repay overdraft amount.

There is higher level of risk is associated in the form of bankruptcy.

Adequate share of funds get arranged.

Venture capital

Venture capitalists may share ownership as it is over their discretion as they want share in ownership or share in profits.

They sign legal agreement before investing funds in their business.

There is a risk in the form of withdrawal of funds before the set time period.

Huge amount get invested by the venture capitalists.

Retained profit

Radisson plc utilise their own funds so there is no dilution takes place.

There is no legal implication is there.

If the fail to make optimum utilisation of that amount then it might create lack of liquid funds.

Adequate and supportive share of funds get arranged.

(Trotman, et. al., 2012)

B. Evaluate the appropriate sources of finance for the expansion plan of the above company.

Radisson plc make use of four options in order to render support to their expansion plan such as:

  • Leasing: Radisson plc opt the lease option for their capital nature expenditures such as purchasing new equipment. With the use of this option they took required large equipment on lease and make payment of small amount in the form of interest for a set specific period. They utilise their available funds in other activities (Horngren, 2013).
  • Retained profit: Radisson plc make use of their save funds while expanding their business. This option didn't create any liability over them and provide adequate support to expansion activities by their own.
  • Bank Loan:Radisson plc contact the bank in order to get adequate funds against higher value of security (in the form of fixed assets). They agree to pay interest for the loan period at specified rate such as 4.5%. If they failed to repay loan amount they get declared as bankrupt (Horngren, 2013).
  • Equity share: Radisson plc issue ordinary shares in order to arrange funds for expansion purpose. They get huge share of capital but they share their ownership with shareholders. Organisational functioning goes in the hand of board of directors (Horngren, 2013).

Task 2

A. Analyse the cost of funding the project using equity versus debt finance and recommend your choice.

Cost of funding having three types such as:

  • Cost of equity: To arrange funds Radisson plc issue equity share and at the end of year they share earned revenues with them in order to make them satisfy. Dividend payment is considered as the cost of equity as it is paid to the shareholders (Weetman, 2013).

Cost of equity (Ke) = Annual dividend per share (d) / Share price (P0)

  • Cost of debt: For arranging funds Radisson plc took loan from bank and in return they pay interest on regular basis till they repay their loan amount to bank. Payment of interest amount determined as cost of debt.

Cost of debt (Kd) = 1 - tax rate (T) (Weetman, 2013)

  • Cost of opportunity: Radisson plc make use of retained profits in their business expansion plan and if that amount get utilised for different investment purpose and it may provide better rate of returns. These better rate of returns termed as opportunity cost (Weetman, 2013).

B. Explain the importance of financial planning and assess the information needs for financial decision making.

Financial planning: The planning made by Radisson plc in order to make proper utilisation of their finance is denoted as financial planning. There are various benefits associated with the Radisson Plc and according to their business need they adopt suitable financial planning type such as short term, medium term and long term financial planning (Kemp & Waybright, 2013). There are some points discussed as importance of financial planning such as:

  • It make estimations or forecast the requirement of financial needs.
  • Radisson plc encourage towards saving their funds for emergency purposes or avoid lack of liquidity.
  • Helps in getting adequate control over the usage of the available finance.
  • It makes them efficient and effective towards achieving their set goals (Kemp & Waybright, 2013).

In the financial decision making different set of information is required which is firmly divided into three parts such as:

  • Strategic information: That share of information which is utilise by Radisson plc management for the purpose of preparing their strategies which get firmly followed to meet out their objectives. Their major focus is towards long term objectives and for this purpose they make use of information related to internal aspects as well as external aspects (Kemp & Waybright, 2013).
  • Tactical information: That share of information which is utilise by the middle management of Radisson plc as they get the strategies and implement them in their processing so that they attain their set objectives. They make use of adequate information for preparing plans and putting adequate monitoring over activities.
  • Operational information:That share of information which is required by the lower management of Radisson plc in order to implement the plan and execute all activities in systematic manner so that their objectives get attained by them in effective manner (Kemp & Waybright, 2013).

C. Explain the impact of suggested financing option on the financial statement.

There is adequate impact put over the financial statement by the suggested financing option such as:

  • Statement of cash flows: The inflow of cash get increased as from all three options adequate amount get inflow but along with this there is small outflow of funds also takes place in the form of payment of interest and dividend. There is increase in cash inflow (Freeman & Freeman, 2010).
  • Statement of financial position: Radisson plc took loan from bank (that increase cash balance as well as increase their long term liability), issue shares (increases cash balance as well as increase the shareholders funds) and make use of retained profits (decrease retained funds share as well as reduce their liquidity). There is no so much fluctuations are noted down.
  • Statement of comprehensive income: Radisson plc didn't earn much with the help of it but with this effect they need to make extra payments in the form of interest and dividend which lower down their overall profit share. It increase their expenditure and decreases their profit amount (Freeman & Freeman, 2010).

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Task 3

A. Analyse the importance of budgets for variation and make appropriate decisions for Radisson Plc.

Budget: The management report that include systematic procedure of processing different activities in systematic manner along with adequate allocated materials. With the use of this management adequately implement the strategies made by the upper management in order to meet out their set objectives. There are lot many budgets get prepared such as cash budget, sales budget, production budget, material budget and many more (Harrison, et. al., 2010).

Importance of budget get discussed below such as

Budget provide adequate set plan for executing the activities as it make the coordination effective. With the use of budget report they compare their actual performance that helps in evaluating their actual capabilities and identifying loop holes present in their processing. It helps in executing the activities well on time as well as helps in getting set desired outcomes. All the available resources get allocated appropriately and effectively. All activities get controlled effectively and render adequate level of support in attaining favourable results (Harrison, et. al., 2010).

Radisson plc also make use of budget for different purposes such as

They allocate their available resources in effective manner as per their desired outcomes so that they attain their set objectives. They effectively manage their funds and helps in reducing the chances of sure losses. With the use of it they make estimations and forecast the requirements as well as they make evaluation of their actual performance so that they make required changes in it. They put adequate level of control and monitoring over their activities that helps in getting adequate level of growth (Harrison, et. al., 2010).

B. Explain how you would calculate unit cost and make pricing decisions based on appropriate information at the Radisson Plc.

Unit cost: The share of funds that spend by the Radisson plc. in order to prepare final product that get termed as unit cost and it make inclusion of different variants of costs such as variable, fixed, direct and indirect, etc (Miller-Nobles, et. al., 2016).
Price: The cost at which product get sold by the Radisson plc and easily paid by the user. Price is the effective combination of the unit cost and profit margin which is easily paid by user and with the sale of product they get adequate revenues.
Cost and price are interlinked with each other and there are number of reasons such as: If the prices of product set too low then Radisson plc is not able to recover their incurred cost. On the other hand if they set the product prices too high then it can't afford by every user and in this manner they can't earn adequate profits because their product can't get sold in the desired manner. It is not easy to set the prices as pricing decisions get influences with different factors such as demand, costs, customers and many more. For processing pricing decisions there are various methods such as penetration pricing method, skimming pricing method, cost plus pricing method and many more (Miller-Nobles, et. al., 2016).

Radisson plc evaluate their market need and set the prices with the help of cost plus pricing method as with the use of it they evaluate the market need and set adequate profit margin in it that helps in getting adequate share of profit with their sales (Miller-Nobles, et. al., 2016).

C. Assess the viability of the expansion project using investment appraisal techniques such as the NPV.

Net present value: This technique is followed for the purpose of measuring profitability related to their respective project. For getting profitability information investment amount get deducted from the amount of total present value of cash inflows. If the amount is positive it states profits and vice-versa (Fleay, et. al., 2011).
Payback period: This technique is followed for the purpose of measuring recovery time period in which they recover their funds by getting inflows. The time period in which whole invested amount is recovered is denoted as payback period (Fleay, et. al., 2011).

Initial investment for both projects = £46,000

Cash flows are as below:


Project (A)

Project (B)

Year 1



Year 2



Year 3



Year 4



Calculations are as follows:

NPV calculation for project A:


Cash inflows

Dis. Rate @ 10%

Dis. Cash inflows

Year 0




Year 1




Year 2




Year 3




Year 4




Year 4








(Fleay, et. al., 2011)

NPV calculation for project B:


Cash inflows

Dis. Rate @ 10%

Dis. Cash inflows

Year 0




Year 1




Year 2




Year 3




Year 4




Year 4








(Fleay, et. al., 2011)

[Note: There are two "Year 4" in both the table it is the scarp value that attained in the fourth year. In order to render detailed information it is mentioned separately]

Calculation of payback period:

Project A Pay-back period

2 + [(46,000 - 31,000) / 23,000]

2 + 0.65

2.65 years

(Fleay, et. al., 2011)

Project B Pay-back period

3 + [(46,000 - 43,0000)/ 25,000]

3 + 0.12

3.12 years

(Fleay, et. al., 2011)

Analysis:Project A recover their investment amount in 2.65 years which is lower as compare to Project B as it took 3.12 years. But the share of profits of project A is £7,920 which is much lower than the profitability of Project B as it rendered profit of £9,445. So project B is selected over project A.

Task 4

A. Discuss the above mentioned financial statements of Radisson Plc.

Financial statements of Radisson plc include such as:

  • Statement of comprehensive statement:The statement that provide a summarised overview of the revenues and expenses of the Radisson plc made or earned within a financial year and their operations management utilise this statement in measuring their net income after deducting all their expenditure (Russell, et. al., 2012).
  • Statement of financial position:The statement that provide a summarised overview of their total assets (including fixed assets & current assets), short term liabilities, long term liabilities and their equity capital. It helps their management in knowing their financial position in the market.
  • Statement of cash flows: The statement that provide a summarised overview of all cash and cash equivalent transactions whether it inflows or outflows. It helps in knowing the utilisation of the liquid funds as well as helps in controlling the unnecessary usage of their liquid funds (Russell, et. al., 2012).

B. Select two different types of companies (one could be Radisson Plc) and compare the formats of financial statements.

Comparisons among two different companies are as follows on the basis of financial statement formats:

Base for difference

Radisson plc

B&S Ltd.

Nature of business

They are running their business as a company.

They are running their business as a partnership firm.

Owner of the firm

Shareholders are the owners of firm.

Partners are the owner of firm

Statement of comprehensive income

Management prepare this statement and follow all the set rules and regulation by IFRS along with vertical format.

Management prepare the profit and loss appropriation account for the purpose of measuring and dividing overall profit earned.

Statement of financial position

Management prepare this statement as per the guidelines of the IFRS as well as follows the vertical format in order to provide detailed information about their assets and liabilities.

Management prepare the statement by following the set IFRS guidelines but follows horizontal or vertical format according to their discretion.

Statement of cash flows

Management make use of the IFRS guidelines in order to prepare this statement as they prepare it vertically. It provide detailed and clear information related to different usage of liquid funds.

Management didn't prepare cash flow statement as there are not so many stakeholders that make demand of their cash related transactions.

(Singh, 2012)

C. Interpret the financial statements using appropriate ratios of a public limited company and compare with those of another company.

Ratio description and interpretation



Radisson Plc

B&S Ltd.


Gross profit

By calculating this ratio revenue earning efficiency by making sales is measured.



Ratio outcomes shows B&S Ltd. having more gross profits as they are efficient enough to make sales and earn adequate revenues.

Net profit

By calculating this ratio profit earning efficiency is measured.



Outcome of ratio shows B&S Ltd. having higher ratio that shows they are more efficient in managing their administrative expenditure.

Current ratio

By calculating this ratio capability of meeting short term liabilities is measured.



The outcomes of ratio shows that liquidity position of B&S Ltd. is better than Radisson plc. But both of them are failing in maintaining ideal ratio.

Quick Ratio

By calculating this ratio capability of attaining sufficient liquid funds is measured.



Ratio outcomes stated that B&S Ltd. are in better position as they have adequate liquid funds with them but both of them are not maintaining ideal ratio of liquidity.

Receivables turnover ratio

By calculating this ratio capability of collecting funds is measured.



Results outcome shows that both have same level of capability in attaining their funds from their respective market.

Inventory turnover ratio

By calculating this ratio inventory selling efficiency in a year is measured.



Results outcome shows that both have same level of capability in selling their inventories in an year.

(Barth, 2015)

Analysis: It is concluded that B&S Ltd. are more efficient than Radisson Plc in every item whether it is profit earning or maintaining liquidity within the organisation. It is required to make effective level of improvement as both of them are facing liquidity problems as they both fail to maintain adequate liquidity (Barth, 2015).

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Radisson plc effectively make use of their available financial resources with the use of the marketing planning and in case of any requirement they arrange the finance in the adequate ratio of debt and equity. There is adequate impact put by the inflow of funds over their financial assets as some of the assets get increased with this in the same ratio their liabilities get increased. Budget is prepared by the organisation in order to make the effective use of their available finance along with this they get their desired outcomes. There are different types of organisations that perform their activities and follow different set of rules in order to prepare and maintain their financial accounts. In order to analyse their performance internally as well as externally Radisson plc make use of the ratio analysis through which it get to know that they are not able to maintain adequate liquid funds as well as didn't earn adequate level of profits.


Barth, M.E. 2015, "Financial Accounting Research, Practice, and Financial Accountability: FInancial Accounting Research and Practice", Abacus, vol. 51, no. 4, pp. 499-510.
Deegan, C.M. 2016, Financial accounting, 8th edn, McGraw-Hill Education (Australia) Pty Ltd, North Ryde, N.S.W.
Fleay, D., Poustie, N. & Mroczkowski, N.A. 2011, TAFE accounting: financial accounting applications, 3rd edn, Cengage Learning, South Melbourne, Vic.