Assessment Brief

1. Unit and Assessment Details

Course Title: HND BusinessUnit Name: Managing Financial ResourcesAssessor: Syeda Sana NaseemInternal Verifier: Aamir Saeed

Assessment Title: Finance Sources, Use of Finance as resource and Financial decisions

Assessment Method: ReportAssessing in: Group of 3Number of Words: 3000 words (Total Max 25 pages)Outcomes Covered: 1,2,4 Issue Date: 07/10/2009Due Date: 30/11/2009

Group Member:

College No. Learner Name Learner Signature

Learner’s Declaration: I confirm that the work submitted for this assignment is my own.

Date

Outcomes Covered

OUTCOME

1 Identify the sources of finance available to business

2 Explain the use of finance as a resource within a business

4 Make financial decisions based on financial information available

NOTE: Attach this page as first page of your report

Purpose and Aim

This assignment is aimed to develop a thorough and detailed understanding of different sources of finance used by the organization. Students are required to identify different sources of finance for any business and asses the implications and costs associated with those sources on the firm. This will guide the students to use their decision making skills in selecting an appropriate source for their own business. Students will also apply the basic financial techniques for decision making in relation to costing, budgeting, pricing and investment.

Scenario

After graduation, you plan to start up your own business instead of being employed. You already have had a good picture about your business, including what you will manage, where to manage your business, what you should buy for its operations, who are your customers and so on. But as we all know, every new business needs money when starting up. Equipment will need to be bought, the workplace established and marketing costs met - all before the first sale is made. Then once you're trading, you'll need cash to pay the bills and keep the business going. As the result, the first step to start up your business is to find and manage the money. That is, you should identify the sources of finance available to your business. Then, you should know the use of finance as a resource within your business. Besides, you should make financial decisions based on financial information available according to your firm.

In the report, you are assigned to finish the following three tasks after giving a clear and concise description about your business, including the business scope, the target market and so on. General information about the business should include:

8 Name of the business 9 Address (Note: You should write out the definite address so that you can forecast

the rent and the market clearly)

10 Type of Business

11 Investors and the Amount of Investment

12 Main Business

13 Target Market

14 Organization Structure

Department/Position Personnel (number) Expected Salary

(Note: Generally speaking, a big firm will establish its departments under the

direction of CEO as follows: Purchasing Department, Production Department, Sales Department, HRM Department, Accounting and Finance Department, Research and Development Department and so on. But for a small firm, an employee may be asked to take on a lot of work. So, it’s sensible to start up the departments according to the scale of the firm and the amount of work)

15 The Money Needed to Start up the Business (the amount and the reasons)

Item Amount Note

Total

(Note: Generally speaking, when you want to start up a business, you should have enough money at the beginning to meet the following demands. Such as, rent, fitting expenses, furniture expenses, equipment expenditure, purchasing costs, utilities expenses(including water, electricity, telephone, etc.), administration fee(including paper for copying and printing, entertainment, education and training, conference, etc.) and so on)

After completing the description, please finish the following three tasks according to the established firm.

Task 1As mentioned above, the first step you should do is to identify the sources of finance available to the business, in which you:

16 Discuss different sources of finance available for any business in detail. Imagine where a business might get money from. (Outcome1.1)

17 Assess the implications of different sources of finance. Such as, legal and financial concerns, ownership of assets purchased, advantages and disadvantages of each kind of source of finance, etc. Illustrate with some examples of the implications. (Outcome1.3)

18 Discuss the factors that should be kept in mind while selecting an appropriate source of finance for different needs. (Outcome1.2)

19 Identify different needs of your organization for which finance will be required. Categories all the identified needs as short term, medium term or long term. Identify different sources of finance that can be used to fund different needs for starting the business. (Outcome1.2)

20 Select appropriate sources of finance for your firm. After analysing the

advantages and disadvantages of each source of finance and their suitability as well as other considerations, you have to assess which method of finance would be appropriate for the scenario and why. For example, you might borrow short loan from the bank to run your day-to-day operation, and you might lease a machine you need from a lessor. Give atleast 2 valid reasons for selecting each source of finance for different needs. Present your reasoning in a table showing selected finance source along with the need (for which that source is used) and two possible reasons. (Outcome1.2)

Task 1 is expected to be finished before 19/10/2009

Task 2After you have selected the appropriate sources of finance for your business, you should know well the use of finance as a resource within your firm. For this you are required to:

21 Assess the cost of different types of finance for the company. (Outcome2.1)

22 Discuss the need of steady flow of financial resources for your new business. Describe its importance and what would happen if there are any interruptions in funding/finance flow. (Outcome2.2)

23 Use your collected information and data to determine the amount of cash required

after you start its operations, using cash flow forecast and develop a credit policy according to your firm (provide proper reasons for each decision). (Outcome2.2)

Task 2 is expected to be finished before 26/10/2009

Task 3Running a firm often need you to make a series of financial decisions, such as budgeting, pricing, investment appraisal and so on. Here, you are required to make financial decisions based on financial information available according to your firm.

Task 3.1

Make decisions related to costs and budgeting based on management information available

24 Discuss all different costs that will be incurred during the operations of the firm. Differentiate these costs as direct/ indirect and fixed/ variable. (Outcome4.1)

25 Comment on why some costs are irrelevant for decision making. Identify which costs will be considered irrelevant or relevant when you estimate per unit cost of your production/or cost of providing service. Estimate per unit cost of production (or cost of providing service) keeping in view only the relevant costs. (Outcome4.1)

26 Prepare for the 1st four quarters following budgets for your firm. (Outcome4.1)

If your firm is producing and selling goods, please finish the following budgets. 27 Sales budget (in units)28 Production budget (in units)29 Raw material purchases budget (in units and £)30 Labour budget 31 Overhead Budget

If your firm is selling goods or offering services, please finish the following budgets.32 Sales budget (in units)33 Purchasing budgeting(in units and £)34 Costs of goods/services sold budgeting

This task is expected to be finished no later than 9/11/2009.

Task 3.2

Make appropriate pricing decisions for the goods or services provided by your business

35 Discuss different factors that can affect the pricing decision of your company. Identify which factors should be considered according to your business. Give reasons for each. (Outcome4.2)

36 Determine the price for your goods or services provided by your business based on different pricing methods and give the reasons why each method should be used. (You should determine a profit margin that is practical enough to be applicable. Give comments on this as well) (Outcome4.2)

37 Decide what is the minimum number of units, your firm should produce. Apply cost benefit analysis to calculate operating income for estimated sales value (from sales budget) (Outcome4.2)

This task is expected to be finished no later than 16/11/2009.

Task 3.3

Use investment and project appraisal techniques to assess the viability of a project. Different equipments are needed to run a business. To achieve the objective of financial management, we need to use investment and project appraisal techniques to assess the viability of a project. If your firm need to purchase a piece of equipment, please show us how to make the decision.

Consider that owing to the boost in sales, the owner of a business has decided to invest in a new piece of equipment for the production line. The investigations into the supplier of

such a piece of equipment had identified four possible sources.

Machine 1:A German firm producing a high precision piece of equipment with software allowing different production runs to be catered for.

Machine 2:The same equipment without the software option secured from a firm in Taiwan.

Machine 3:A different machine manufactured locally - significantly cheaper!

Machine 4:Another machine with a different specification but which is suitable for the job required, produced by a firm in the United States.

The costs associated with each machine are as follows:Machine 1 Machine 2 Machine 3 Machine 4

Initial Cost £550,000 £550,000 £290,000 £460,000Expected Cash Flow (£)Year 1 20,000 50,000 15,000 20,000Year 2 75,000 175,000 80,000 70,000Year 3 125,000 200,000 120,000 120,000Year 4 250,000 175,000 100,000 210,000Year 5 200,000 70,000 60,000 300,000

The firm believes that the likely discount rate will vary from 4.5% to 6%.

38 Discuss different project appraisal techniques in detail and also highlight the relative costs and benefits of each method. Also give suggestions regarding when these methods are suitable to be used. (Outcome4.3)

39 Present an argued case for one of the machines that the firm should invest in. You should use at least two appropriate methods of investment appraisal. (Outcome4.3)

40 Suggest other factors that will need to be considered in taking the decision in addition to the quantitative analysis given above. (Outcome4.3)

This task is expected to be finished no later than 30/11/2009.

Grading Statement (For Report)

1.1: Identify the major sources of finance for a business

P1: Discuss different sources of finance available for any business

1.2: Select appropriate sources of finance for a business project

P2: Discuss the factors that should be kept in mind while selecting an appropriate source of finance

P3: Assess the implications of different sources of finance for any businessM1: Identify different financial needs and categories them as short term, medium term or long term, identify different sources of finance that can be used to fund these needsD1: Select appropriate sources of finance for your firm and give atleast 2 valid reasons for selecting each sources of finance.

2.1: Assess the cost of different types of finance for the business

P4: Assess what the cost of different types of finance available for a business

P5: Discuss the need of steady flow of financial resources for your new business. Describe what would happen in case of interruptions in funding/finance flow.M2: Determine the amount of cash required after business starts operations using cash flow forecast and suggest a credit policy according to your firm

P6: Discuss different costs that will be incurred during the operations of the firm. Different these costs as direct/ direct and fixed/ variable

M3: Comment on why some costs are irrelevant for decision making. Identify which costs will be considered irrelevant or relevant. Estimate per unit cost of production.

D2: Prepare all relevant budgets mentioned in the tasks

P7: Discuss different factors that can affect the pricing decision of your company. Identify which factors should be considered according to your business.

M4: Determine the price for your goods or services provided by your business based on the normal pricing methods and give the reasons for it

D3: Apply cost benefit analysis to calculate operating income and Decide what is the minimum number of units, your firm should produceP8: Discuss different project appraisal techniques in detail also highlight the relative costs and benefits of each methodM5: Present an argued case for one of the machines that the firm should invest inD4: Suggest other factors that will need to be considered in taking the decision

Resources Required:41 Lectures slides42 Managing Financial Resources BTEC Course Book43 World Wide Web

Common Skills CoveredCommon Skills Criteria EvidenceWorking with and Relating to Others

•1 Treat others’ values, beliefs and opinions with respect

•2 Relate to and interact effectively with individuals and groups

•3 Work effectively as a team member

Minutes of meetings, distribution of tasks, and carrying out individual responsibilities as a group member. Meeting the desired objectives within the deadlines through cooperation.

Managing Tasks and Solving Problems

•1 Use information sources

•2 Deal with a combination of routine and nonroutine tasks

•3 Identify and solve routine and non-routine problems

Capability of students to work as a team member and his ability to handle and interpret different kind of information will be assessed.

Communication •4 Receive and respond to a variety of information

•5 Present information in a variety of visual forms

•6 Communicate in writing

•7 Participate in oral and non-verbal communication

The format of the submitted assignment, quality of expression and use of technical terms, Viva from the students.

Applying Technology •1 Use a range of technological equipment and systems

Usage of Microsoft Office (word and excel) in report writing will be considered

Applying Numeracy •4 Apply numerical skill and techniques

Calculations done by students. Attached copies of rough works or excel sheets. Student will be asked during the viva to make different calculations.

General Instructions

44 The copy of this assignment brief should be attached with the assignment as annexure.

45 Team meetings should be held by the group and minutes of meeting must be attached with the assignment as annexure.

46 The group should identify its leader and responsibilities of each individual in the team. This statement should be attached as the annexure and a copy should be provided after one week of assigning tasks to the respective lecturer.

47 Clearly mention if any assumptions are undertaken for the given scenario.48 Books and online resources can be used of the college library and Central

Computer Lab for any assistance. But direct copying from these resources is not allowed.

49 Proper referencing should be given in the Harvard Style. 50 Visits need to be arranged and made to the organizations, meeting the respective

managers, the college will provide a reference letter for the project and the manager of the organization is welcome to contact the administration at the college.

51 The college has strict penalty for plagiarism and the assignment will be cancelled if the assignment is observed for this.

Internal Verifier Assessor