BTEC EDEXCEL HND DIPLOMA IN BUSINESS (MANAGEMENT & HUMAN RESOURCES)

OFFERED BY INTERNATIONAL COLLEGE OF BUSINESS AND TECHNOLOGY

Managing Financial Statement Resources and Decisions

Ruwin Ratnayake
BATCH 15
ICBT NUGEGODA

SUBMITTED TO: MS. Nilushi Gunaratne

01/02/2015

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Managing Financial Resources and Decision

Individual Assignment

Acknowledgement

I would like to take this opportunity to convey my sincere thanks and heartfelt gratitude to my
lecturer MS. Nilushi Gunaratne for providing me with the necessary guidance, support and
assistance to complete this assignment. In the meantime I would also like to thank my fellow
colleagues and the staff of ICBT for supporting me in numerous ways to make this assignment a
success.

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Managing Financial Resources and Decision

Executive Summary

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Managing Financial Resources and Decision

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Managing Financial Resources and Decision

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Table of Contents
Acknowledgement...........................................................................................................................2
Executive Summary.........................................................................................................................3
1.0.

Introduction...........................................................................................................................5

2.0.

Report...................................................................................................................................6

2.1.

Organizational structure and culture (LO1.1)...................................................................6

2.1.1.

Wal-Mart....................................................................................................................6

2.1.2.

Samsung Electronics..................................................................................................7

2.2.

Samsung Electronics impact of organizational structure on culture (LO1.2)..............10

2.3.

Impact of personality and selective perception on work-life (LO1.3)............................12

3.0.

Newspaper Articles.............................................................................................................14

3.1.

Effectiveness of leadership styles - Mark Zuckerberg and Martin Winterkorn (LO2.1) 14

3.2.

Henri Feyols principles of management: influence on present day organizations

practices of management (LO2.2).............................................................................................16

3.3.

Different approaches to management (LO2.3)................................................................17

3.4.

The nature and influence of formal and informal groups (LO4.1).................................19

3.5.

Factors that lead to effective and ineffective group work (LO4.2).................................20

3.6.

Wipro Technologies - Impact of modern technology on team functioning (LO4.3)......21

4.0.

Conclusion..........................................................................................................................23

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5.0.

Individual Assignment

References...........................................................................................................................24

1.0. Introduction

The assignment is divided into two parts, which are assessment one and two. Assessment one is a
report based on two organizations, which are Wal-Mart and Samsung Electronics.
Wal-Mart is the largest retail store in the world. The companys vision is to be a global leader in
diversity and inclusion, and the companys mission involves delivering the customers promise
of saving money. The company holds the no. 1 position in the Fortune 500 companies for the
year 2013. Samsung Electronics is a South Korean Company. Its vision emphasizes on inspiring
the world, create the future. The company was founded in 1969 as a small export company and
today it has become one of the worlds leading electronic companies.
The organizational structure and culture of both organizations are analyzed. The final part of
assessment one includes the discussion of factors that affect individuals behavior at work. This
was done taking into account all the factors which affect an individuals behavior.
Assessment two is about newspaper articles. The articles include the comparison of leadership
styles of Mr. Mark Zuckerberg who is the CEO of Facebook and Dr. Martin Winterkorn the CEO
of Volkswagen. Henri Fayols principles of management is being discussed in one of the articles.
Different approaches to management has been explained, Nature and influence of formal and
informal groups in an organization and the factors that would lead to effective and ineffective
group work is also explained. Furthermore the impacts of modern technology on team
functioning in Wipro Technologies are also discussed. The above articles have been written by
taking into account the appropriate management theories.

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From Here

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2.0. Report

2.1.

Different Finance Sources

Every Business requires capital to fund their activities/ operations, therefore

there are various options of funding the company. Business owners select the
best appropriate finance options, and such options can be classified as
follows,

Source of Finance
1. Internal Sources
Personal savings
Sale of assets
Retained profit
Working capital
2. External Sources
Ownership Capital
I.
Ordinary Shares
II.
Preference Shares

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NonI.
II.
III.
IV.
V.
VI.

Ownership Capital
Debentures
Bank loans
Bank overdraft
Leasing
Hire Purchase
Grants

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Managing Financial Resources and Decision

cost
Sources
Personal
savings

Sale of assets

Retained profit

Working

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Description

Individual Assignment

Advantages

Disadvantages

No interest expenses will

Using personal saving
be added.
will consume time and
will not be sufficient
Sharing return will not
when engage in larger
applicable
business projects.
Funds can be used when
Having
saving in bank
ever needed, which will
will may have only the
save time
interest rate however,
No Creditors to pay back
if the organization
Depositing into a bank will
invest in a project or
grant you interest rates.
elsewhere, the will get
opportunity get more
investment return.
Internal source of One of the fasters way to Asset is no longer to be
finance, by sale of
finance the organization.
used in the company
assets. Whenever The no borrowing cost or
Some business doesnt
a business sells of
debts.
have surplus asset to
its assets and the Funds can be used when
be sold.
cash generated is
ever needed, which will It can be useful another
used internally for
save time
purpose of the
financing the
organization.
Sharing return will not
capital needs
Example: if the
applicable
company sale a car it
No interest expenses will
also can be used as
be added.
rent car which will
make a small profit for
long period of time.
A internal source of There is no fixed
Not available for a
finance. The
requirement of interest
new business.
phenomenon is
or installment
If the owner tries
also known as
payments.
take all the retained
Ploughing Back of Since this is an internal
profit there will be no
Profits. Profit left
source of finance there
buffer cash left in the
after paying
is no cost attached.
organization to
disbursement to
sudden opportunity
Since these are long
the shareholders
arises.
term of finance no
or drawings by the
Having retained
dividend payments are
capital owners.
required.
profit in the
organization would
The owners control is
be disadvantage
not diluted and
where the funds can
decisions are not vetted
be used elsewhere
by lenders
which can be more
profitable projects.
Working capital is
No interest expenses will Funds invested for
the amount of
be added.
working capital can
The funds that a
business
organization,
keeps in an
account in a bank
or in a safe from
their own
investment which
is internal source
of finance.

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Managing Financial Resources and Decision

capital

Preference
Shares

Debentures

money available
for the day to day
running of the
business.
Working capital=
current assets
current liabilities.
This an external
source of finance.
Preference shares
have a fixed
percentage
dividend before
any dividend is
paid to the
ordinary
shareholders.

A long-term
security yielding a
fixed rate of
interest, issued by
a company and
secured against
assets

Sharing return will not

applicable
Funds can be used when
ever needed, which will
save time
No Creditors to pay back
Doesnt have to be repaid
No interest is payable
Dividends do not have to
be paid in a year in
which profits are poor
Since they do not carry
voting rights, preference
shares avoid diluting the
control of existing
shareholders while an
issue of equity shares
would not.
preference shares does
not restrict the
company's borrowing
power
The non-payment of
dividend does not give
the preference
shareholders the right to
appoint a receiver

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Benefit of Tax- Debt

Financing or Issuing of
Debenture results in
interest expense for the
borrower which is a tax
deductible expense.
No Dilution of Control:
Issuing of debentures or
accepting bank loan
does not dilute the
control of the existing
shareholders or the
owners of the company
No Dilution in Share of
Profits- Opting for
debentures over the
equity as a source of
finance keeps intact the
profit-sharing
percentage of existing

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Individual Assignment

be utilized for the

other finance or
capital requirements.
Lack of sufficient
working capital
No cash flow
Profits will be paid
out as dividends to
more shareholders
Ownership of the
company could
change hands.
Preference shares are
considered a very
costly source of
finance which is it
seems that when
they are compared
with debt as a source
of finance.
Skipping Dividend
Disregard Market
Image

Bad for Low

Inflationary
Conditions
Debenture financing
enhance the
enhance the
financial risk
There is a limit to
which funds can be
raised through
debentures.

Managing Financial Resources and Decision

Bank loans

Leasing

shareholders.
External source
Set installments over a
borrowing from the
period of time which is
bank.
good for budgeting
Multiple loan option in
the market therefore
can choose the most
appropriate loan for the
business.
If the organization has
good relationship with
the past, bank will not
reluctant to lend
money.
When purchasing
The advantages are
assets such as new
that the business does
machines or
not need to find a large
vehicles A legal
initial lump sum to buy
document outlining
the equipment and can
the terms under
thus pay for the asset
which one party
from its own revenue.
agrees to rent

Cost is spread over a

property from
number of years which
another party.
will be good budgeting
for the organization.

Better security on
your finance since the
product is owns by
leasing company.

Individual Assignment

Can be expensive due to

interest payments
Bank may require security
on the loan
Lengthy application
process to verify before
lending money.
Bank doesnt grant the
total amount of loan
that they request,

The lessee does

not get the
ownership of the
asset.
Long term
expenses to the
company
Maintenance for
the lease product will
be responsible for
the company.

http://www.efinancemanagement.com/sources-of-finance/internal-source-of-financeretained-profits-sale-of-assets-reduction-of-working-capital

http://www.investopedia.com/university/small-business/financing-your-business.asp
http://smallbusiness.chron.com/sources-finance-advantages-disadvantages14407.html
http://www.fao.org/docrep/W4343E/w4343e08.htm
http://www.bbc.co.uk/schools/gcsebitesize/business/finance/sourcesoffinancerev2.sh
tml
http://www.efinancemanagement.com/sources-of-finance/internal-source-of-financeretained-profits-sale-of-assets-reduction-of-working-capital

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Individual Assignment

Evaluate the appropriate sources of finance for a business project

Finding most appropriate method to finance the business can be classified in to different ways to an
organization as above mentioned. Therefore, when choosing the method by which you finance your
business can depend on your management style. S & S PLC is the one of the most growing supermarkets
chain in Sri Lanka therefore there are alternative ways of finance a business. When selecting a most
appropriate method S & S PLC choose the right method of finance the company and consider the below
assess the different types of finance based on the following criteria as below mentioned,
Amount of money required expand the supermarket which will add about the assets needed and how to
spend for promotional activity and estimate funds needed.
Finding the cheapest option available or the cost of borrowing money would be interest rates has to be
paid when borrowing money must find most budgeting way of finance all available sources of finance.
The length of time of the requirement for finance it can be short term or long term
having proper vision and planning would be advantage to the company.
S & S PLC is the one of the fastest growing supermarket chains in the western province and southern
provinces in Sri Lanka would be great advantage to the company to finance through browning funds
through a bank or bank loan. The company can estimate the required money and borrow the funds from
financial institutes since these days the interest rates are low compared to last year that would be great
advantage to the company and further company does not have to find a large initial lump sum they can
pay it as installments with the agreed period of time. S & S PLC is well-known supermarket chain in
western province and southern provinces therefore the will be not reluctant to lend money to the company
and it would be the fasters ways to finance the company. After the expansion new business in Central and
North western provinces with the business profit the loan payments would be not much bare to the
company.
When purchasing assets such as new machines or vehicles I would like to suggest the leasing source that
benefit the company will not need a large initial lump sum to buy the equipments and the cost wil spread
over period of time and better security on your finance since the product is owns by leasing company
therefore when starting new project in Central and North western provinces machines or vehicles can be
leased since the benefit is high compared to other finance sources. Therefore I would like suggest bank
loan for the initial finance of the project and leasing for the equipments would be appropriate methods of
finance for S & S PLC which is a fastest growing supermarket chains.

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Task 02
2.1 Financial planning is the backbone of the company
Financial planning one of the most important helps the company determine your
short and long-term financial goals and the existent of the company. Without a
financial planning the company may be unsuccessful and be bankrupt in a short
period of time therefore a good financial planning will handled the company
smoothly lead the business to success. The good financial paining can be monitored
through cash flow in the business in and out. The important of the financial be
concern when the an organization predict a outstanding debt and cost arising in the
future the organization must able to be prepared for the situation in advance, the
company should have prepared a proper financial plan before hand. The
organization must have financial planning on current assets, fixed assets and
intangible assets keeping up to date reports in order to evaluate past report and
make improvements and learning to be make more advance financial planning
decision on the best way to spend or gain resources effectively and efficiently.
Financial planning done in proper is not enough it should be wisely made decision if
the company gets opportunities that that arise such as buying inventory from
suppliers at provisionally reduced prices.
Also business must area that financial planning must be involved is in
understanding the income and profit or loss in financial reports. This is very
significant as it helps to identified that where most operational expenses are and
planning to reduce in the future activities in the organization. The organization must
also track all the liabilities and of a business and planning on how a business will
utilize its resources to settle outstanding debts before they result in operational
problems.
It is also paramount that you stick to your budget to avoid making losses that can
cause substantial damage to the business and also company can increase the cash
flow by tangible assets that are not being use in the organization which could be sell
them off to improve the cash flow. Therefore its impossible for an organization to
function and be financially stable without financial planning. It provides a guide for
the overall operation of the business therefore financial planning is the backbone of
the company.

Financial planning in any business is very important. A good business plan

provides a guide for the overall operation of the business and the way
finances will be handled within a business. The importance of financial
planning for your business can be seen in how cash flows in and out of the
business. It is very hard for a business to be financially stable if they have
not laid out a financial plan. This is because sound financial planning is the
backbone for a successful business. Without a financial plan a company is
bound to lose its financial grip and the results can be disastrous.
The importance of financial planning for your business is best seen when a
company is faced with a situation concerning outstanding debts and rising
cost. So to be able to be prepared for the situation in advance, the
company should have prepared a proper financial plan before hand. The

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success of a business is greatly determined by the financial plans they

have laid out and how well it is followed.
Financial planning is the best way to monitor assets of a business. Since
financial reports have records of spent, earned and remaining assets, the
importance of financial planning for your business comes into play in
keeping an updated record of the business resources. Financial planning
evaluates the current assets, intangible assets and fixed assets of a
business. Therefore the plan helps in deciding on the best way to spend or
gain resources.
Most businesses have monthly or periodical revenue variations. That
means that there are times when cash is in plenty and when there are
cash shortages. In making a sound financial plan, the business owner
takes these periods into account and keeps a tight restriction on
expenditures especially during the periods when there is a decrease in
cash flow. The importance of financial planning for your business is felt
when it cushions you from being unable to make payrolls. A proper
financial plan also allows a business owner to take advantage of
opportunities that arise such as buying inventory from suppliers at
provisionally reduced prices.
Another area where the importance of financial planning for your business
is exhibited is in income and profit or loss. Every financial planning
demands a review of financial reports to encourage an understanding of
income and profits of loss. This is very significant as it helps the business
make out its sales or revenue, net income and operational expenses.
Being able to identify these factors helps the business to make a well
informed decision on which ventures to improve on and which were
profitable.
Just as financial reports show the records of assets of the business, they
also show the various liabilities of a business. Proper financial planning
requires a good analysis of business current liabilities, owner's equity and
long term debts. This is very useful in keeping the business in track of
liabilities due soon. It
Also assist in planning on how a business will utilize its resources to settle
outstanding debts before they result in operational problems.
Before making financial plans it is important to be decided on what type of
business you want to embark on. This will help in making basic and
comprehensive plans for finances. It is also paramount that you stick to
your budget to avoid making losses that can cause substantial damage to
the business. Being realistic by having a clear perspective of the business
you run is very useful. You could not be having any tangible assets but if
you do like machines that are not being used, you could sell them off to
improve your cash flow.

http://www.agualtiplano.net/the-financial-plan.php

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http://smartfarmbc.ca/content/financial-management

The finance department of a company generates a variety of financial information

that is helpful in decision making,
Budgets are plans for the future. Managers are able to monitor budgets in order to
spot variances and make ongoing adjustments to plans. Financial statements such
as the profit and loss account and the balance sheet provide information about past
performance. These statements can be compared with the results achieved by
similar companies or in previous time periods to identify areas for improvement.
http://businesscasestudies.co.uk/business-theory/strategy/financialinformation-and-decision-making.html#axzz3PlTUX0jX

Task 2.2
Financial information needs for decision makers
Decision makers
1. Shareholders and investors
Earnings and revenue growth of the company investing is worth or not.
Cash flow trends - Net income is much higher than cash flow, investors
want to be aware and find out why.
Debt load Its must that investors to understand how much debt
companies have and how that debt compares with a company's ability
to pay
Dividend per share
Profitability

2. Managers
Inventory valuation
Depreciation
Capitalization versus expense
Investments in common stock
Manage the affairs of the company
Analyzing the organization's performance

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3. Lenders
cash flow available to service debt
profitability of the operation
company's liquidity
Viability based financing is especially associated with venture capital.

4. Suppliers
Sales in the organization
Creditworthiness of the business
liquidity information
cash flows
5. Government
Make sure the companies are following applicable laws
Taxation and regulatory purposes
Track of economic progress different sectors of the economy.
6. Customers
Financial strength and staying power of the company
financial position of its suppliers
Sales in the organization
7. Employees
Need these reports in making
Compare from last year reports
Earnings and revenue growth of the company investing is worth or not.
Cash flow trends
Debt load
Profitability
http://www.accountingverse.com/accounting-basics/users-of-financialstatements.html
http://finance.mapsofworld.com/financial-report/statement/users.html
https://www.boundless.com/accounting/textbooks/boundless-accountingtextbook/introduction-to-accounting-1/what-is-accounting-17/uses-offinancial-reports-112-6832/
2.3
The Impact of Financial Statements
Businesses regularly put out financial statements such as the income statement,
balance sheet and statement of cash flows. When these financial statements are

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released, they can have large impacts on the business and on the investors of the
company. Therefore, it is critical for the business to ensure that the information the
statements present is correct
http://smallbusiness.chron.com/impact-financial-statements-23794.html
I.
Debentures
Example-If the company borrows a Smith International trade for Rs. 20,000.00 with
interest rate of 10% per year.
Income Statement
No effect to the income statement. However, the Interest rate will be stated in
expenses as interest rate expenses as Rs. 2,000.00.
Balance Sheet
Under the section Long term Liabilities will increase to Rs. 20,000.00 and Current
asset section will increase as cash to Rs. 20,000.00.
Cash flow statement
Cash flow statements will Debit Rs.20, 000.00
Cash flow statements Credited as Rs 2,000.00 as interest rates
Smith International trade account Credited RS. 20,000.00
II.
Bank loans
Example-If the company has a loan of a Commercial bank for Rs. 50,000.00 with
interest rate of 10% per year.
Income Statement
No effect to the income statement. However, the Interest rate will be stated in
expenses as interest rate expenses as Rs. 5,000.00.
Balance Sheet
Under the section Long term Liabilities will increase to Rs. 50,000.00 as Commercial
bank loan and Current asset section will increase as cash to Rs. 50,000.00.
Cash flow statement
Cash flow statements will Debit Rs.50, 000.00
Cash flow statements Credited as Rs 5,000.00 as interest rates
Commercial bank account Credited RS. 50,000.00

III.
Leasing
Example- Company purchase a Lorry from LB finance with initial installment for Rs.
100,000.00 however the Lorry value of Rs. 350,000.00 and the rest of the value
would be installment with interest Rs. 300,000.00 for the year.

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Individual Assignment

Income Statement
No effect to the income statement. However, the Interest rate will be stated in
expenses as interest rate expenses LB finance as Rs. 50,000.00.
Balance Sheet
Under the section Non- current Assets will increase as Lorry to Rs. 350,000.00 and
current asset cash will decrease as Rs. 100,000.00 and the Current liability will
increase as LB finance 300,000.00 and net profit will decrease as interest rate
expenses Rs. 50,000.00.
Cash flow statement
Cash flow statements will be credited as interest rates Rs.50, 000.00
Cash flow statements Credited as Rs 100,000.00 as Lorry purchase
LB finance account will be credited as Rs. 300,000.00

IV.
Bank overdraft
Example-Company uses an overdraft the commercial bank account for Rs 20,000.00
to purchase machinery of Rs. 120,000.00
No effect to the income statement.
Balance Sheet
Under the section Non- current Assets will increase as machinery to Rs. 120,000.00
and current assets cash will decrease for Rs. 100,000.00 and the Current liability will
increase as commercial bank overdraft Rs. 20,000.00
Cash flow statement
Cash flow statements Credited as Rs 100,000.00 as machinery purchase
Commercial bank account will be credited as Rs. 20,000.00

V.
Sale of assets
Company Sale an unused Lorry for worth of Rs. 500,000.00
No effect to the income statement.
Balance Sheet
Under the section Non- current Assets will decrease as machinery to Rs. 500,000.00
and current assets cash will increase for Rs. 500,000.00

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Individual Assignment

Cash flow statement

Cash flow statements Debit as Rs 500,000.00 as Lorry sale
Lorry account will be credited as Rs. 500,000.00
http://www.investopedia.com/university/business-plan/business-plan7.asp

up to
here
Task 03
The estimated data for Orient Ltd two machines available on the market are as
follow,

Initial investment
Life project
Year 01
Year 02
Year 03
Year 04
Total

Machine A
Rs. 120,0000
4 years
Rs. 38,000
Rs.38,000
Rs.35,000
Rs.30,000
Rs. 141,000

Machine B
Rs. 96,000
4 years
Rs.35,000
Rs.35,000
Rs.35,000
Rs. 35,000
Rs. 140,000

Payback period for Machine A (PBP)

Payback period = INITIAL INVESTMENT(cash
Outlay)/ANNUAL CASH flow
Rs. 38,000+Rs. 38,000+Rs. 35,000 = Rs. 111,000 = for 03 years

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Managing Financial Resources and Decision

Initial investment with 03 year period total

Rs. 120,000.00 - Rs. 111,000.00
=Rs. 9,000.00
payback period,
=9,000/30,000*12
=3.6 months
4months
Therefore the payback period would be,
PBP = 3years and 04 months
Payback period for Machine B (PBP)
Payback period = INITIAL INVESTMENT(cash
Outlay)/ANNUAL CASH flow
Rs. 35,000+ Rs. 35,000 = Rs. 70,000 = for 2years
Initial investment different with 02 year period total
Rs 96,000- Rs. 70,000.00
= Rs. 16,000.00
Payback period
=16,000/35,000*12
=5.4 months
Therefore the payback period would be,
PBP = 02years and 05 months

Accounting rate return (ARR) Machine A

ARR = Average Profit After Deprecation And Tax *100/ Initial
Investment

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Individual Assignment

Average profit after deprecation and tax = Rs. 141,000 Rs. 120,000
= Rs. 21,000/4
= Rs 5,250.00

ARR

Rs. 5,250 *100/120,000

4.375 %

Accounting rate return (ARR) Machine B

ARR = Average Profit After Deprecation And Tax *100/ Initial
Investment
Average profit after deprecation and tax = Rs. 140,000 Rs. 96,000
= Rs. 44,000.00/4
= Rs. 11,000.00
ARR

=
=

Rs 11,000*100/96000
Rs 11.458 %

Net present Value (NPV) Machine A

NPV

PV of net cash inflows

Year

Initial
investment
120,000

0
1
2
3
4
Total
NPV

Batch 15

=
=
=

Initial cash investment

Cash Inflows

Discount factor
15%

Discount cash
inflow

38,000
38,000
35,000
30,000

0.870
0.756
0.658
0.572

33,060
28,728
23,030
17,160
101,978

Present valve of cash flow

101,978
120,000
(18,022)

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Managing Financial Resources and Decision

Positive NPV
Year
0
1
2
3
4
Total
NPV

=
=
=

Initial
investment
120,000

Individual Assignment

Cash Inflows

Discount factor
5%

Discount cash
inflow

38,000
38,000
35,000
30,000

0.952
0.907
0.864
0.823

36,176
34,466
30,240
24,690
125,572

Present valve of cash flow

125,572
120,000
NPV =
5,572

Initial Investment

Net present Value (NPV) Machine B

Year
0
1
2
3
4
Total
NPV

Batch 15

Initial
investment
96,000

Cash Inflows

Discount factor
15%

Discount cash
inflow

35,000
35,000
35,000
35,000

0.870
0.756
0.658
0.572

30,450
26,460
23,030
20,020
99,960

Present valve of cash flow

=
99,960
96,000
=
3,960

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Initial Investment

Managing Financial Resources and Decision

Negative value
Year
0
1
2
3
4
Total
NPV

=
=
=

Initial
investment
96,000

Individual Assignment

Cash Inflows

Discount factor
18%

Discount cash
inflow

35,000
35,000
35,000
35,000

0.847
0.718
0.609
0.516

29,645
25,130
21,315
18,060
94,150

Present valve of cash flow

94,150
- 96,000
NPV =
1,850

Initial Investment

Internal Rate of return (IRR)

Internal Rate of return (IRR) Machine A

IRR =

(B - A)

C - D
A= Interest rate that taken positive NPV
B= Interest rate that taken negative NPV interest rate
C=Positive NPV
D=Negative NPV

IRR =

C
C - D

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(B - A)

Managing Financial Resources and Decision

IRR =

0.05 +

Individual Assignment

5,772

(0.15 - 0.05)

5,772 - (18,022)

IRR =

0.05 +

5,772

(0.1)

23,794
IRR =

0.05 + (0.244) * 0.1

IRR =
IRR =

0.05 +
0.74

0.024

Internal Rate of return (IRR) Machine B

IRR =

(B - A)

C - D
IRR =

0.15 +

3,960

(0.18 - 0.15)

3,960 - (1,850)
IRR =

0.15 +

3,960
5,810

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(0.03)

Managing Financial Resources and Decision

IRR =

0.15 + (0.681

IRR =

0.15 + 0.02043

IRR =

0.170

Individual Assignment

0.03)

Task 04
4.1
Main Financial statements

Balance Sheet

A balance sheet can be described as a snapshot of a firms financial condition at a specific moment in time
which is generally at the closing of an accounting period. A balance sheet is made up of assets, Liabilities
and owners or shareholders equity.
A balance sheet helps the business proprietor to gather information on the financial strengths and the
potential capabilities of the business quickly. The balance sheet can also be used to identify and analyze
trends, mainly in the areas of receivables and payables. Balance sheet one of the most vital and basic
elements in providing financial reporting to potential leaders such as banks and other financial
institutions, investors and vendors who are considering how much credit to grant the business.

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Managing Financial Resources and Decision

Individual Assignment

Income Statement/Profit And Loss Account

An income statement is also commonly known as P&L statement. This is a summary of a firms profit and
loss during any one given period of time. For instance, a month, 3 months, 6 months, 1 year etc The
income statement helps to record all revenues generated and the operating expenses for a business during
a given period of time.
An income statement enables a firm to keep track of revenues and expenses so that they can determine the
operating performance of the business over a specific period of time. It further enables a firm to find out
what areas in the business are over budget and under budgeted. In addition items that are causing
unexpected expenditures can be highlighted such as phone, fax, e-mail or supply expenses. Income
statements can also help firm track dramatic increases in product returns or cost of goods sold as a
percentage of sales. They can also be used to determine income tax liability.
It is crucial to format an income statement so that it is appropriate to the business being conducted.
Balance sheet and the income statement is the most vital document demanded by finance sources in order
for them to decide weather to grant the firm loans and provide them with purchases on credit basis.

Statement Of Owners Equity

This is also referred to as the statement of retained earnings. This document is one of the four main
financial statements that quantify the financial position of organizations operations at a specific period in
time. The statement of owners equity details the changes made to the owners equity account during the
accounting period as the organization issues dividend payments and retains money for the use within the
organization for investment. To completely define the statement of owners equity the firm has to settle
the previous equity balance with withdrawals or dividend payments, investments and income of the
present financial year.

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Individual Assignment

http://www.investopedia.com/university/business-plan/business-plan7.asp

4.2
Balance sheet and income statement
Financial statement
Balance sheet
Dividend
Income statement

Sole trador

Companies

Sole trade
Companies
Compare
4.3 compare two annual reports of two companies
Watawala Plantation
Kotagala Plantation

3.0. Conclusion

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Compare

Managing Financial Resources and Decision

4.0. References

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Individual Assignment