"Managing Financial Resources-1Managing Financial Resources Managing Financial Resources-2Executive SummaryThe assignment discusses different sources of finance available to a business. It has been foundthat there are two main sources of financing; those are equity financing and debt financing.Usually companies go for mix of debt and equity financing to balance risk and return. The costof different types of financing has been analyzed and their impact has been analyzed on thebalance sheet and income statement. It has been analyzed that the equity financing is expensivebut less risky than debt.The cash budget of given company was analyzed and two differentpricing methods have also been analyzed. It has been found that different pricing methods resultin different prices to be charged. The capital budgeting was applied to Project 1 and Project 2and it was found that both the projects are not feasible for the company. The main types offinancial statements include income statement, balance sheet, statement of cash flows andstatement of owners’ equity. The ratio analyses have been performed for A plc and B plc; whichindicates better performance of B plc in 2014.Managing Financial Resources-3Table of ContentsIntroduction ..................................................................................................................................... 5Task - 1 ........................................................................................................................................... 5Sources of Financing....................................................................................................................... 5Implications of Different Sources of Financing.............................................................................. 6Appropriate Source of Financing in the Given Case ...................................................................... 7Task – 2 ........................................................................................................................................... 8Cost of each of the Suggested Sources of Finance ......................................................................... 8Information for Different Decision Makers .................................................................................... 8Tools Used in Financial Planning ................................................................................................... 9Impact of Each of the Sources of Finance in Income Statement and Balance Sheet ...................... 9Task – 3 ......................................................................................................................................... 10Analysis of Cash Budget ............................................................................................................... 10Analysis of Unit Cost / Price ........................................................................................................ 11Capital Budgeting ......................................................................................................................... 11Task – 4 ......................................................................................................................................... 12Main Financial Statements ............................................................................................................ 12Different Financial Statement Formats ......................................................................................... 13Ratio Analysis ............................................................................................................................... 14Liquidity Ratios ........................................................................................................................ 14Investment Ratios...................................................................................................................... 14Gearing Ratios .......................................................................................................................... 14Conclusion .................................................................................................................................... 15References ..................................................................................................................................... 16Appendix ....................................................................................................................................... 18 Managing Financial Resources-4List of FiguresFigure 1- Cost of Debt Financing ................................................................................................. 18Figure 2- Cost of Equity Financing .............................................................................................. 18Figure 3- Balance Sheet by two different financing approaches .................................................. 19Figure 4- Income Statement with different financing approaches ................................................ 19Figure 5- Cash Budget .................................................................................................................. 20Figure 6- Per unit cost and price calculation ................................................................................ 21Figure 7- Capital Budgeting Techniques for Project 1 and Project 2 ........................................... 22Figure 8 - Balance Sheet A plc ..................................................................................................... 22Figure 9- Balance Sheet B plc ...................................................................................................... 23Figure 10- Ratios of Both calculations ......................................................................................... 23Figure 11- Income Statement of A plc .......................................................................................... 24Figure 12- Income Statement B plc .............................................................................................. 25 Managing Financial Resources-5IntroductionThis assignment focuses on the aspects that govern the financial system of differentorganizations. The sources of financing available to the company include the equity financingand debt financing. Every type of financing has its own merits and demerits, which have beendiscussed in this assignment. Also, different types of financing lead to different financial andnon-financial implications for the company. The cost of different methods of financing has beenanalyzed with a specific case and it has been found that the cost of equity is higher than the costof debt but risk associated with debt borrowings is high. The cash analysis has also beenperformed for the company given in the case, which shows sufficient cash flow of the company.It has been analyzed that different pricing methods lead to different prices of same product whenthe cost of producing the product remains same. The capital budgeting has been performed forproject 1 and project 2 to find out their feasibility. The main types of financial statements andtheir formats have been discussed and ratio analysis has been performed for A plc and B plc. Task - 1Sources of FinancingEvery firm needs financing at some stage of its business when they need more assets but do nothave funds to finance those assets. There are different sources of financing available to everybusiness with each type of financing having its own merits and demerits. The main sources offinancing include the debt financing and equity financing. The debt financing refers to borrowingfrom banks, issuing bonds and sometimes borrowing from other sources (Khan and Jain, 2008).According to Brigham and Joel (2010), the equity financing refers to issuing the shares in themarket to general public or corporations; the two types of shares include the common stock andthe preferred stock. All three types of financing involve some additional costs to the business andat the same time help the business to grow its operations by utilizing the funds financed.In accordance to Brealey, Myers, Allen and Mohanty (2007), the debt financing is comparativelycheaper source of financing but payments to debt holders are an obligation and the debt holdersare not subject to any business risk. The debt holders get the fixed payment in form of interestand principal repayments; debt also becomes risky when the company goes bankrupt. The cost of "