Managerial Resources Assignment Roehampton University

Introduction

Managing organisational funds and bring the financial stability in the operational activities which will be effective and helpful as per meeting the goals of industry. Analysing the factors will be adequate in terms of determining the profitability as well as ability of business in making suitable changes in the operational practices. In the present research there will be discussion based on financial issues relevant with COCO limited. Examination of various facts through implicating NPV, IRR, Break even analysis and cash budgeting techniques in the operations. The firm is known as public limited company that is listed on Alternative investment market in UK and has been doing operating in various places for the last 5 years. It used to provide intellectual property to financial services, HR consultants, marketing companies and investment property capital all over in London.

Sources of funding

In relation with ascertaining various funds for the operations there are several sources of funding which will be helpful as per meeting the suitable requirements of firm. It includes internal and external sources of funding which will be appropriate sources on which COCO limited can gather a required amount of funds (Al-Malkawi and Pillai, 2018).

Internal Sources:

COCO Limited can gather satisfactory level of funds for the sources through internal sources which is comprised with various advantages and disadvantages. However, there will e various internal sources of funds analysed such as:

Sources of funding

Advantages

Disadvantages

Owner's equity

· It includes the funds which were being invested by the owner's of organisation which are operating sole proprietorship, partnership etc.

· There is no need of making payments to any interest over the spent funds.

· It will not be adequate and appropriate as per meeting requirements of funds in all the operational activities of firm.

Retained Earnings

· These are the earnings which were remained after making payments to the dividends to equity holders.

· It will be an appropriate source which in turn will be useful for making expansion and diversification of sources.

· Through these sources the firm make allocation of funds in the variolous tasks or operations.

· It has the biggest disadvantage is that there will be manipulation of the funds or it will be misused by professionals in the organisation (Garner, Kim and Yong Kim, 2017).

· It involves over capitalisation and tax evasion on which firm reduces their taxable charges through it.

Debt collection

· These are the amount which the firm has not yet recovered through debtors in the basis of sales.

· Debt balance will be tax free as there will not be any charges against such payments which are yet to recovered by a firm.

· Collection of such debts will be helpful in gathering the appropriate revenue and gains through such operations.

· It may affect the consumers and buyer relationship of the business.

· In relation with such activities there will be reduction in level of sales and it may affect the numbers of consumers.

 

External sources:

These are the sources through which COCO limited can gather the most appropriate and satisfactory required amount of funds. It can be generated through external sources such as:

Sources of funding

Advantages

Disadvantages

Equity capital

· By selling proportionate equity of a firm in the market which will be effective as per rising capital structure of entity.

· Business professionals will become able to gather the satisfactory amount of funds for the operations which in turn will be adequate for improving brand image in market.

· It will require appropriate time for proper decision making as well as promoting the operational activities of firm.

· Firm has to make payment for dividends which will reduce their profit generate in a period (Wei, Xu and Zeng, 2017).

Borrowings

· It comprises with the long term and short term borrowings taken by organisation a per meeting the operational needs in the right time.

· It will be beneficial as company and people will have satisfactory amount of funds for operations which generate them desired amount of funds.

· In relation with taking loans from banks and financial institutions there will be requirements of making payments of interest over such borrowings.

· Loans and borrowings has been brought by the firm in against security of its ownership or any assets.

Governmental grants

· To meet the financial needs as well as initiating business operations the government of various locations are planning to bring the satisfactory amount of funds for the operations (Pros and Cons of Grants, 2017).

· It will be a helpful source as there are no requirements of making payments to any taxes over such a collected amount.

· It will be a very time consuming process as government will grant the money to organisation as per making various investigation over financial stability and needs of business.

· There are most of the grants are for short term period which will not be that satisfactory as per meeting the long term requirements.

Investment appraisal

Planning relevant with the expansion of business operations as well as implicating new projects in the operational practices will be manages through estimating adequate capital budgeting. Thus, investment appraisal will be helpful to the industries in terms of making suitable control over operations as well as management of performance. It comprised with various techniques such as NPV, ARR, IRR and payback period. Thus, determination of profitability and fruitfulness of the proposed plan of COCO limited will be measured through implicating such techniques in analysing the outcomes (Mansour and Bhatti, 2018). Moreover, there will be discussion based on analysing advantage and limitation of various investment appraisal tools.

Coco super:

Year

0

1

2

3

4

5

Sales revenue

100

1400

5000

4800

3800

3200

Less:

 

42

150

144

114

96

   

1442

5150

4944

3914

3296

Component A

 

580

500

820

860

1000

   

14.5

12.5

20.5

21.5

25

   

594.5

512.5

840.5

881.5

1025

Component B

 

1200

1050

1400

1800

1700

   

30

26.25

35

45

42.5

   

1230

1076.25

1435

1845

1742.5

Overheads cost

 

220

220

230

200

200

STO 1

 

328

328

328

328

328

   

11

9.9

8.91

8.019

7.2171

   

90.2

81.18

73.06

65.76

59.18

STO 2

 

182

182

182

182

182

   

14

12.88

11.8496

10.9

10.03

   

63.7

58.6

53.92

49.6

45.63

   

2198.4

1948.534

2632.48

3041.86

3072.31

Gross profit

 

-756.4

3201.466

2311.52232

872.1417744

223.685548448

Annual capital portion @ 25%

 

-189.1

800.3665

577.88058

218.0354436

55.921387112

PBT

 

-567.3

2401.0995

1733.64174

654.1063308

167.764161336

Corporation tax @ 19%

 

-107.787

456.208905

329.3919306

124.280202852

31.8751906538

Net profit

 

-459.51

1944.89

1404.25

529.83

135.89

NPV analysis for Coco Super

Year

cash flows

Discounting factor @ 9%

Cash outflows

0

     

1

-459.51

0.917

-421.57

2

1944.89

0.842

1636.98

3

1404.25

0.772

1084.34

4

529.83

0.708

375.34

5

135.89

0.65

88.32

     

2763.41

   

Initial cost

13800

   

Net present value

-11036.59

Coco Platform:

Year

0

1

2

3

4

5

Sales revenue

 

1680

5400

3960

3960

2880

Less:

 

50.4

162

118.8

118.8

86.4

   

1730.4

5562

4078.8

4078.8

2966.4

Component A

 

580

500

820

860

1000

   

14.5

12.5

20.5

21.5

25

   

594.5

512.5

840.5

881.5

1025

Component B

 

1200

1050

1400

1800

1700

   

30

26.25

35

45

42.5

   

1230

1076.25

1435

1845

1742.5

Overheads

 

220

220

230

200

200

STO 1

 

328

328

328

328

328

   

11

9.9

8.91

8.019

7.2171

   

90.2

81.18

73.06

65.76

59.18

STO 2

 

182

182

182

182

182

   

14

12.88

11.8496

10.9

10.03

   

63.7

58.6

53.92

49.6

45.63

   

2198.4

1948.534

2632.47

3041.85

3072.3

Gross profit

 

-468

3613.4

1446.3

1036.94

-105.9

Annual capital allowance @ 25%

 

-117

903.3

361.5

259.2

-26.4

PBT

 

-351

2710

1084.7

777.706

-79.43

Corporation tax @ 19%

 

-66.69

514.9

206.1

147.76

-15.09

Net profit

 

-284.31

2195.18

878.64

629.94

-64.34

 

Year

cash inflows

Discounting factor @ 11%

cash outflows

0

     

1

-284.31

0.901

-256.1351351351

2

2195.18

0.812

1781.6573330087

3

878.64

0.731

642.4539952663

4

629.94

0.659

414.9609898529

5

-64.34

0.593

-38.1826584473

     

2544.7545245454

   

Initial cost

7600

   

Net present value

-5055.25

 

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Net present value:

This analysis is comprised with analysing the present value of future cash flows of the organisation. Thus, on which firm's will become able to analyse the profitability and fruitfulness of projected plans of business. On the basis of above listed measurements it can be said that COCO Limited will have profitable gains as if they proceed the operations for COCO platform project. It is because of less negative outcomes derived from such observation.

Limitation of NPV:

There are various disadvantage of this appraisal techniques such as it does not measure the size the project and the outcomes derived from such analysis are mainly not being effective as per having suitable analysis over the facts (Baker, Jabbouri and Dyaz, 2017).

Average rate of return:

To demonstrate the probability of firm in relation with making the adequate efforts as well as determining qualitative techniques which represent the profitability earned over projected plan of business. COCO limited will be helpful and beneficial as if they implicate the use of such techniques in making the profitable ascertainment of projects they are planning to have.

Limitations:

There can be various disadvantage of this investment appraisal techniques as it ignores the time factors, it uses the alternative funds for operations (Neupane and Neupane, 2017). Moreover, professionals at COCO Limited will not have reliable and accurate outcomes through such techniques.

Internal rate of return:

These are internal rate of return over projected plans which comprised with the estimated cash flows of firm. COCO Limited will be benefited as if the professionals will implicate the use of this technique into operations. It brings the ability to compare the profitability of projected plans and the return a firm will have over their investment amount in such plans.

Limitations:

Professionals at COCO limited will have suitable advantages in terms of acknowledging the various limitation of these techniques (Sundarasen, Goel and Zulaini, 2017). It does not consider the project duration and future costs which will not be helpful as per making further expansion plans of business.

Cash budgeting

By considering the operational activities of COCO limited there has been analysis based on examining the factors as well as making suitable changes into operational activities of the firm.

Cash budget

June

July

August

Sales Revenue

     

Strategy formulation

9310

9310

9310

Business planning

12600

12600

12600

Total profit

21910

21910

21910

       

Cash sales @ 40 %

8764

8764

8764

credit sales @ 60 %

0

13146

13146

Total receipts

8764

21910

21910

       

Expenses

     

Staff Salary expenses

13300

13300

13300

Rent paid

5333.33

5333.33

5333.33

Administration expenses

4533.33

4533.33

4533.33

Marketing cost

3266.66

3266.66

3266.66

Insurance received

1666.67

1666.67

1666.67

Business Rates expenses

1000

1000

1000

Loan Interest amount

840

840

840

Electricity and Gas

400

400

400

Telephone expenses

266.67

266.67

266.67

Total payments

30606.66

30606.65

30606.65

Surplus/Deficit

-21842.66

-8696.6

-8696.6533

Cash at the Opening balance

3000

3000

5696.6533

Closing balance

3000

-5696.7

-3000

Break even analysis

By considering the sales and the relevant costs associated with the business operations which in turn will be effective and helpful in determining Break-even analysis of entity. Thus, the below listed analysis reflect BEP of COCO Limited.

Sales revenue

581

581

581

Variable cost per units

428

428

428

Total Contribution

153

153

153

Total expenditure

30607

30608

30609

Total units

200

200

200

Sales (BEP)

15000

15000

15000

Evaluation

According to the all above information, it has been seen the overall performances of the company is all about providing positive results during the period. All the sales and earning can be enhanced in more reliable and efficient manner to attain more suitable profitability in coming period. Moreover, in relation with managing BEP of firm there is needed to have proper execution over the financial and operational practices of business.

Literature relevant with Budgets and Break even analysis

By considering the fruitfulness of various analysis it can be said that there are various operational techniques which will be helpful as per bringing the suitable measurement on financial data set of firm. Moreover, COCO Limited will have satisfactory gains in the required period as per ascertaining the most suitable analysis over operations.

Break Even analysis:

According to Al-Malkawi and Pillai, (2018), to have the most appropriate information regarding firm's sales, variable and fixes costs which will be assistive as per uplifting appropriate analysis over businesses. The level of commercial activity at a given period of total cost and earning of business within an organisation. This evaluating performed at internal part of a business planning which is observed the reality which is being states at individual idea that does not be implemented for increasing profitability position of an organisation

Budgets:

As per the views of Wei, Xu and Zeng, (2017), Budgetary techniques are to be used by professionals which in turn will be effective and helpful as per monitoring the financial activities of firm. Here, professionals of various industries will make appropriate analysis over fund requirements of business on which they will be helpful as per making appropriate study over the facts. It will be helpful too, in terms of analysing funds requirements as well as making alternative solutions to reduce the costs implicated in various activities.

Considering issues

In order to remain for longer period of time in the market. There are certain issues can be taken into account in reliable manner. Some of them are mentioned underneath:

  • Check of proper planning before execution: Make proper compulsion with overall performances and take deep analysis of all crucial aspects those are reliable for better future.
  • Maintain regular record and valuation: They cannot be complacent though assuming all above data which is being presented in front of the investors to detect leader’s weaknesses.
  • Quality would not be an option, it would be necessities: Proper estimation with proper demand and supply can be lead to detect losses that can make huge impacts on the performances (Baker, Jabbouri and Dyaz, 2017). There is stock valuation that is major problems of scrap and wastages during an accounting period.

Recommendation and conclusion

From the above project report, it has been concluded that managerial finance is utmost crucial expected which will be needed to be analyse overall financial position of the company. It has been summarising all specific description of capital sources those are divided in two categories such as external or internal sources. Certain investment proposal tools are also being analyse by using NPV, IRR and ARR. Further, this has been suggested that overall margin can be assist them for valuable finding for present issues those are arises in an organisation are evaluated in more perfect manner.

References

  • Al-Malkawi, H. A. N. and Pillai, R., 2018. Analyzing financial performance by integrating conventional governance mechanisms into the GCC Islamic banking framework. Managerial Finance. 44(5). pp.604-623.
  • Baker, H. K., Jabbouri, I. and Dyaz, C., 2017. Corporate finance practices in Morocco. Managerial Finance. 43(8). pp.865-880.
  • Garner, J., Kim, T. Y. and Yong Kim, W., 2017. Boards of directors: a literature review. Managerial Finance. 43(10). pp.1189-1198.
  • Mansour, W. and Bhatti, M. I., 2018. The new paradigm of Islamic corporate governance. Managerial Finance. 44(5). pp.513-523.
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