Reference no: EM132994023

Unit 06 Introduction to Finance - OTHM Level 4 Diploma In Business Management

Unit Reference - M/616/2722

Learning outcome 1: Understand sources of finance available to a business.

Learning outcome 2: Understand finance as a resource within a business.

Learning outcome 3: Be able to make financial decisions based on financial information.

Learning outcome 4: Be able to assess the financial performance of a business.

Task 1 Scenario

A friend of yours is eager to start his business (a Florist). Your friend has saved £10,000 but knows that a minimum of £30,000 is needed to start the business.

Instructions

You are to give advice to your friend regarding possible financial sources to raise the remaining £20,000.00 and explain what consequences will each option bring in terms of control and in terms of financial cost as well as the effect on the balance sheet, ultimately recommending one or 2 methods.

You should also explain to your friend that in order to obtain the necessary funds, the stakeholder (e.g. bank, investors, etc.) will need some information before releasing the fund, and explain to your friend what each stakeholder will need. Discuss also the importance of financial planning to ensure that the funds are properly utilise in the business.

You should make a table/notes for your friend to understand the options better.

Task 2 Decision Making Exercise

Instructions Scenario
Mr. Neil Down owner of WoodyTrain, a toy store specialising in handcraft wooden train toys. Mr Neil wants to raise £20,000 by getting a new partner. He has prepared an income statement put together with his last budget to your attention as you expressed interest in being Mr. Down's partner.

Instructions

1. What poor decision(s) did Mr Down take?
2. Which line(s) should be changed for the following budget?
3. Knowing that the selling price of 1 train set is £15, what was the unit cost per train set
4. Given that Melissa and Doug makes a gross profit of £12.40 and a net profit of £1.20 per unit sold, what do you make of Mr. Down's results?
5. Knowing that it was Mr. Down's second year in business and that he started with a capital of
£20,000 and made a Revenue of £212,460.00 and a loss of £5,870.45 on his first year, would you invest? Why/Why not?
6. What other financial statements would you need to see before making a decision? What would these documents tell you?

Attachment:- Assignment_Brief.rar