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    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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