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Research Project Starbucks Assignment

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MANAGE FINANCIAL RESOURCES

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TASK A

 

1. What is the goal of financial resource management

The goal of management of the financial resources of the company is maximizing the profit which can be analysed by calculating the gross margin or net profit margin ratios. Another goal of managing resources is to minimize the cost by reducing the company's expenses.

2     Explain the purpose of the following financial reports:

a)      Balance sheet: Purpose of balance sheet or the statement of finance includes revealing the financial position of the company at a particular time period. The balance sheet purpose is representing what is owned by the company that is its assets and what the company owes that its liabilities.

b)      Income Statement: Purpose of statement of income is representing the loss or profit generated by a company at the period of reporting. The purpose of the statement of income is also showing operating profit, gross profit. This statement shows how net income is obtained from deducting the tax from EBT.

C)     Cash flow statement: Purpose of the statement of cash flow is providing information or data about organisation’s gross payments and gross receipts for a particular time period. The purpose of this statement is to represent all the flow of cash from the operating activities, financing activities and investing activities of the business.

3. Discuss the difference between investment and financing decisions within an organisation

 

The distinction between the financing decision and the investment decisions of the company is discussed below:

The decisions related to finance revolves around ways for paying for expenses and investment. On the other hand, the decisions related to investment of the company revolve around ways for allocating the company’s capital for maximizing the value of organisation. The decision related to investment involves company’s capital investment in fixed or current assets. On the other hand, the decision related to finance of an organisation includes finding the funding source needed for doing investment in business. Decisions related to financing are in connection with debts of companies such as debentures and bonds. In case of financial decisions the return% of the companies are fixed prior and there is no or lesser risk involved. Whereas, the decisions related to investments are linked with preferential shares and equity shares. The risk involved in decisions related to investments is higher and also profitable at the same time. The return from investing decision is higher as compared to decision of financing.

4.       Defining the terms:

 

a) Cost of capital:  The capital cost of the company is referred to cost opportunity for making particular investment. The return rate of the cost of capital needs persuading investors for making the provided investment.

b)   Capital structure: The structure of capital of company’s way of financing overall growth and operations with the help of various funding sources.

c)   Working capital: The working capital of an organisation is the distinguished between the current liabilities such as accounts payable of the company and current assets such as accounts receivables, cash of the company.

5.  Explain the relationship between risk and return 

The relationship among return and risk includes measuring the impact of decrease or increase in return risk of investment. In the relationship which is direct between return and risk, if there is higher risk, there will be higher return. In case of negative relationship between return and risk, if there is higher risk that there will be lower return.

6.  Explain how communication changes when discussing the budget with investors as opposed with lower level management

 

According to Chan et al. (2018), the changes in communication while making discussion of budgeting with the investors is based on highlighting the plan implication related to finance. This also includes defining the requirements of resources for achieving the goals. As investors are familiar with the company’s budget as compared to the management of the lower level, the investors can criticize the budget of the company by implying conditions for additional consumptions. The budget is being foreseen by the management of lower level rather than   investors for studying the trends and for developing strategies necessary by the organisation.

 

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