TEM406 Business Finance Assignment Sample

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Introduction to Business Finance Assignment

E-Portfolio showcases expression of business entity that illustrates external accomplishment and internal processes. E-portfolio helps in evidence-based practices which support managing overall funds and resources of business entity effectively. With the help of this portfolio, organisation is able to manage cash flow, fulfil tax liability and source effective funds which contributes in carrying out the business operations prominently. Moreover, this portfolio helps in providing effective information regarding the firm’s cash inflow and outflow which helps in timely arranging all the required funds. Further, effective pricing is very crucial for the event business as it is a pivotal factor which impacts the overall profitability of the business entity. Current portfolio will include various funding sources and income sources available for event business. Further, it will describe various types of financial and variable costs included in running the business. It will also comprise in-depth information regarding the concept of pricing, marginal costing and profitability, offering useful insights similar to those found in Online Assignment Help in UK resources.

Section1

Activity 1 Sources of funding and income generation

There is a diverse type of funding sources that could be used for arranging all the required funds at a reasonable cost. In the context of starting tour guide business below are various sources which will be used:

Owner’s capital: This includes total amount which an entrepreneur or owner of the business has been invested. This funding source will be used as it does not include an interest obligation and does not required time to sources the funds.

Bank’s loan: It is type of borrowed capital on which interest and principle amount needs to paid after particular time frame (Harun, Hanif and Choo, 2021). This funding will be used as government has established various schemes for promoting tourism in UK which help in outracing required funds at cost-effective prices.

Venture capitalist: It is the type of equity finance in which investors provide funds for start-up for significant share in the company. This source will be used as it is start-up business which is having high growth optional that help in easily sourcing funds. Moreover, this funding also helps in providing expert assistance that help in taking informed decision and helps in effective working of business entity.

However, debenture funding, private equity and IPO will not be used for starting tour business. The firm is not having any prior existence and goodwill which create issue in gaining trust of people result in incapability in issue debentures and shares (López-Crespo et al, 2022). Moreover, private equity and investment firm generally does not lend money to start-up firm which result in not opting for such sources.

Estimated cash flow of Tour business for 12 months:

Cash flow of Tour Guide for next 12 months...

Particulars	January	February	March	April	May	June	July	August	September	October	November	December
Cash inflows
Opening cash inflow	6000	7800	9500	11059	12429.33	13556	14374	14509	14176	13504	17052	20227
Sales revenue	10000	10200	10404	10612	10824	11041	11261.62	11486.86	11946	17083	17767	25406
Other income	1500	1500	1500	1500	1500	1500	1500	1500	1500	1500	1500	1500
Total cash inflows	17500	19500	21404	23171.08	24753.65	26096.45	27135.36	27496.09	27622.38	32087.59	36318.42	47133.52
Cash outflows
Rent	1500	1500	1500	1500	1500	1500	1800	1800	1800	1800	1800	1800
Labour	2000	2300	2645	3041.75	3498.013	4022.714	4626.122	5320.04	6118.046	7035.753	8091.115	9304.783
Interest	2200	2200	2200	2200	2200	2200	2200	2200	2200	2200	2200	2200
Administration expenses	4000	4000	4000	4000	4000	4000	4000	4000	4000	4000	4000	4000
Total cash outflows	9700	10000	10345	10741.75	11198.01	11722.71	12626.12	13320.04	14118.05	15035.75	16091.12	17304.78
Cash deficit / surplus or closing cash balance	7800	9500	11059	12429	13556	14374	14509	14176	13504	17052	20227	29829

Assumption:

There is 20% rise in Rent after 6 month

Profit will be increased by 20% for initial 7 months and by 40% after 7 months.

It has been identified that there is increasing cash inflow over year which denotes high efficiency in paying out expenses in future time indicating long term survival for business entity.

Activity 2 Cash flow statement- Jenny’s cafe

On the basis of jenny’s cash flow statement, it has identified that there is reduction in the anticipated sales after 9 month which is not good indicators for the business entity. Moreover the closing cash balance is continuously deteriorating which indicates inefficiency of firm in effectively paying out their obligation (Description of Jenny’s cafe, 2024). No, Jenny should not be Okay with the estimated cash flow as it does not depicts long term growth potential and creates issue in managing competitive edge in industry.

Jenny should focus on enhancing its cash flow which helps in maintaining stability in industry. In this context, jenny should mould its trade receivable policy so that regular funds could be sourced. Moreover, marketing strategies should be strengthening for attracting numerous customers resulting in higher sales.

Activity 3 Duncan Bannatyne case study on funding

The current article depicts the story of Duncan Bannatyne becoming an entrepreneur. He started his career by identifying requirement of newspaper in neighbourhood and he stated delivered the same. He used his saving to buy ice-cream van which helped him in earning efficient revenue. Moreover, he converted houses in bedsits with the aim of gaining fixed revenue from government (Description of Duncan Bannatyne, 2023). At last, he sold out all his business to create care homes which was then sold out 46 million pounds which help him in becoming financial stable. From the case study, it has identified that effective business plan, capability to take risk and determining opportunity are three crucial requirements for becoming successful entrepreneur.

Question:

1. Sole trader, partnership and limited companies are three form of business.
2. Business plan, finances, opportunity and risk are four factors which help in starting a business (Alshahrani et al, 2023). Opportunity support in determining most accurate business ideas, business plan help in guiding actions which needs to initiated, funds support in financing all such strategies and lastly risk help in determining potential threats so that accurate decision could be taken.
3. Following are various benefits of business plan:

• This plan support in predicting all the potential problem and aids in taking effective action on timely basis.
• Business plan provide guidance regarding various measures which should be undertaken at time of conflicts and legal disputes.
• This business plan helps in identifying valuation and success of the business entity.

1. Following are advantages and disadvantages of External sources of finance:

Advantages	Disadvantages
Aids in diversify risk Promotes flexibility help in business expansion	Loss of ownership Increases obligation (Le, Bo and Nguyen, 2023) High interest cost

Activity 4 CIMA case study on cash flow

From the case study, it has been identified that even after adequate profits organization may fails due to insufficient cash flow. From the case of Premium League Football Club, it has depicted that cash flow management is very crucial which aids in paying out liabilities, fulfilling obligations and help in long term growth (Description of CIMA case study, 2024). Moreover, business cycle also has huge impact on firm’s cash flow as it defines individual’s willingness to invest. However, CIMA focuses on adapting adequate management accountant which aids in managing cash position and support in long term growth.

• Cash flow implies to total funds which move in and out of the business entity over a fixed period.
• Cash flow forecast help in organization in identify whether the present obligations could be fulfilled or not based on which necessary actions are initiated (Espinoza and Medina, 2021). Moreover, it also helps organization in identifying whether expansion decision could be taken in future or not.
• All the profit does not indicates the actual cash inflow of the company as it also includes various sales and purchases on credit basis. However, cash is more vital than revenue as lack of cash will create issue in paying out obligation which result in ceasing operations.
• Cash flow helps organization in determining existing obligations and also aids in planning for future strategies. This also helps in monitoring inflow and outflow of the cash based on which accurate policies could be formulated (Schrimpf, Shin and Sushko, 2020). Moreover, recession results in slower cash flow as businesses are not working successful which leads to reducing overall purchasing power of people.

Activity 5 True/False Cash Flow Activity

• False
• True
• False
• True
• True
• False
• True
• True
• False
• True

Section 2

Activity 1 Tax liabilities in UK

National Insurance is basic element of the welfare state in the UK and it is considered as a type of social security, since payment of national insurance contributions builds power to certain state advantages for employees and their families. A person pays compulsory National Insurance if they are 16 years old or above or a worker earning more than £242 per week. The money of National Insurance a person pay relies on how much they are paid per day. If a person earns between Primary Threshold and Upper Earnings Limit then a person will pay National Insurance standard rate which is 13.25% in 2022/2023 on their earnings over Primary Threshold. Moreover, the Primary Threshold in year 2022/2023 is £190/week to 5 July 2022 after that £242 as of 6 July 2022. Additionally, £967/week is Upper Earning Limit for year 2022/2023 (TaxAid, 2024). If an individual earns above Secondary Earnings Threshold then their manager will compensate standard rate of National Insurance of employer on these salaries which is 15.05% in year 2022/2023.

Value-added tax or VAT is explained as consumption tax on products and services charged at each phase of supply chain network in which value is added. The current value-added tax rate is 20% (Wise, 2024). It implements to almost all products and services. 5% is the reduced value-added tax rate and it applies to products and services such as; several health products, fuel etc. VAT registration refers to procedure of listing trade with government as active manufacturing and sales. Self-Assessment refers to the system HMRC (HM Revenue and Customs) utilises to collect tax. Income tax is often deducted automatically from salaries and pensions. Self-Assessment is must be paid after end of financial year.

A sole trader needs to pay 20% tax rate if they earn £12,570-£50,270, 40% if they earn between £50,270 to 125,140 and 45% if they earn above £125,140. Moreover, the current tax rates for limited company is 19% which is called small profits rate and 25% which is known as main rate (QCF, 2024).

Activity 2 Calculating VAT

Following table depict the cost of product before and after VAT and total tax involved in product:

VAT Inclusive (£)	VAT Exclusive (£)	VAT (20%)
20,500	17,083	3,417
27,780	23,150	4,630
16,968	14,140	2,828
72,340	60,283	12,057
655	546	109
347	290	58
9,94,258	8,28,549	1,65,710
45,675	38,063	7,613
1,544	1,287	257
10,112	8,426	1,685

Activity 3 McDonald’s case study

From the above article, it has identified that McDonald is facing issue in effectively managing inventory in their operation. At the initial stage, McDonald uses past information for forecast actual need of the goods and services. However, this method consume huge amount of manager time which create issue in effective forecasting. In year 2004, firm have introduced central stock management function in which manager communicate with Team on regular basis to identify local events. McDonald is having three type of material which includes raw material, semi-finished product and final goods which are managed through First In First Out basis (Description of McDonald, 2024). Moreover, firm has changed its stock management system to Lean stock control which includes identifying factors that could includes customer’s perception by indentifying past record, analysis current event and local factors so that accurate forecast could be initiated. Moreover, manager is involved in identifying need of buffer stock and creating stock control charts which help in effectively managing inventories.

• This system help in reducing firm’ wastages resulting in decreasing cost of production which eventually result lower consumer’s expenses.
• This help in offering require product at right time leading to fulfilling their needs and wants.
• Following are various benefit of Stock management to customers;
• Currently, lean stock control system has been used which includes effectively evaluating all the potential factors which influenced customer’s demand based on which accurate decision could be taken (Taghizadeh-Hesary and Yoshino, 2020). Further various national causal factors are also considered based on which adequate demands are identified.
• In past time, McDonald‘s manager identify need of stock on the basis of past purchases, however this requires huge amount of time and does not provide accurate outcome. Further, restaurant supply planning department was established which communicate with manager so that adequate forecast could be initiated in limited time and cost. This method help in saving managers time and also aids in taking more effective stocking decision.
• Raw material, semi finished goods and finished goods are three types of stocks. Raw material includes beef patties, paper cups and salad ingredient whereas semi finished includes prepared the entire required ingredient so that customer could be served immediately (Lei et al, 2021). Finished goods include assembling all semi produced raw material which will ultimately consume by customer.
• Stock management refers to the process of identifying, ordering, storing and controlling investors of the business entity (Demirgüç-Kunt et al, 2020). This process aims at avoiding situation of over and under stocking based so that cost is controlled while fulfilling customer’s need.
• For effective inventory management, McDonald’ should introduced AI in their inventory management system which will help in providing more effective outcome in less time and cost (Vasilev and Milkova, 2022). These strategies will also supplier management and replenishment which aids in optimising stock management.

Section 3

Activity 1: Meaning of fixed, variable, direct and indirect cost

Fixed costs: Fixed costs are explained as expenditures a business experiences which do not change with amount of products manufactured or services offered (Pearl, 2022).

Variable cost: It refers to any expenditures which change on the basis of how much a firm manufactures and sales like labour, raw materials and utility expenses.

Direct cost: It can be described as price which can be entirely attributed to manufacturing of particular products or services (Abou Taleb and Al Farooque, 2021).

Indirect costs: An indirect cost refers to the money an organisation expends even while it is not selling products or offering services.

Activity 2 Surrey Air Service

• Marginal costing: Marginal cost refers to the change in the overall manufacturing cist which comes from developing or manufacturing one extra unit.
• Breakeven: Breakeven point refers to the manufacturing level at which overall revenue equal whole expenses (Deshpande et al, 2023).
• Profitability: In this company emphasis over setting up price so that maximum revenue could be earned which help in managing stability.

Activity 4 Pricing strategies

Following is the brief explanation of the following term:

Right pricing	This help in covering cost and managing firm’s profitability.
Loss leaders	This help in creating completive by offering product at low prices than product cost. .
Penetration pricing	Offer product at lower profit which help in increasing sales (Ali and Anwar, 2021).
Psychological pricing	The aim of this strategy is to influences customer’s buying habits and boosting sales.
promotional pricing	In this company deliberately reduces prices as to create brand awareness.
value pricing	Price is decided on the basis of customer’s perception related to company.
Premium pricing	Prices are high with the aim of attracting quality conscious customers (Saharan, Bawa and Kumar, 2020).
Bundle pricing	This concentres on enhancing customer’ satisfaction by offering multiple product at low prices.
Cost-based pricing	Price is decided on the basis of manufacturing, production and distribution cost.
competitive pricing	This includes strategically setting price below competitors.

Activity 5 Financial statement

• Trading and P&L: This statement defines total income and expenses that are incurred during a year. The statement defines total profit/loss that is earned by the business over within a year which denotes overall profitability position.
• Trial balance: This is the financial report which is used to assure that sum of both debt and credit side are equal. It is type of internal audit which aids in identifying that no entry has been recorded in wrong account.
• Balance sheet: This statement help in defining firm’s assets and liability position at a specific point of time (Majdi, Dewantara and Bachtíar, 2020). This document shows financial status of organization and support in describing what it owns and owes by company.

Ratio analysis

TEM406 Business Finance Assignment Sample

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Ratio analysis includes comparing line-item data from firm’s financial statement which evaluate overall profitability, solvency, efficiency and liquidity position of business entity. This method helps in identifying overall financial status of company so that informed decision could be initiated. Further, this method helps in establishing cause and effect relationship among elements which aids informing accurate strategies (Iwu et al, 2020). For example: If the current ratio of organization is below 1.5 that it denotes firm’s inefficiency in paying out obligation. Through this ratio, manager identified that focus need to be paid over increasing current assets so hat obligation could be paid off.

Significance of budgeting

Budgeting refer to developing a plan which guide manager in effectively utilizing financial resources. Budgeting help in effective financial control as it aids in determining firm’s viability based on which resources are allotted (Loorbach, Frantzeskaki and Huffenreuter, 2024). Budgeting also support in effective payroll, inventory management and maintaining vendor payment which results in enhancing cash flow management.

Conclusion

By summing up the report, it has been identified that E- portfolio is very significant for effective working of the business entity. Owner’s capital, bank loan and venture capitalist are most effective fund sources for start-ups. It has identified that limited companies, partnership and sole traders are major form of businesses. Business plan helps in guiding manager regarding activities and also aids in defiling firm’s evaluation. Moreover, cash flow help in depicting inflow and outflow of the firm based on which accurate decision could be formed. Stock management helps in effectively forecasting demand and supports in reducing overall cost of business entity. Further, budgeting help in effective utilization of funds result in adequate working of the business entity.

References

Books and Journals

• Abou Taleb, M. and Al Farooque, O., 2021. Towards a circular economy for sustainable development: An application of full cost accounting to municipal waste recyclables. Journal of Cleaner Production, 280, p.124047.
• Ali, B.J. and Anwar, G., 2021. Marketing Strategy: Pricing strategies and its influence on consumer purchasing decision. Ali, BJ, & Anwar, G.(2021). Marketing Strategy: Pricing strategies and its influence on consumer purchasing decision. International journal of Rural Development, Environment and Health Research, 5(2), pp.26-39.
• Alshahrani, S.M., Mohamed, H., Mukhtar, M. and Asma’Mokhtar, U., 2023. The adoption of the e-portfolio management system in the Technical and Vocational Training Corporation (TVTC) in Saudi Arabia. International Journal of Information Management Data Insights, 3(1), p.100148.
• Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S. and Hess, J., 2020. The Global Findex Database 2017: Measuring financial inclusion and opportunities to expand access to and use of financial services. The World Bank Economic Review, 34(Supplement_1), pp.S2-S8.Falato, A., Goldstein, I. and Hortaçsu, A., 2021. Financial fragility in the COVID-19 crisis: The case of investment funds in corporate bond markets. Journal of Monetary Economics, 123, pp.35-52.
• Deshpande, P., de Saxe, C., Ainalis, D., Miles, J. and Cebon, D., 2023. A breakeven cost analysis framework for electric road systems. Transportation Research Part D: Transport and Environment, 122, p.103870.
• Espinoza, A.Q. and Medina, S.K., 2021. Understanding In-Service Teachers' Learning Experience While Developing an Electronic Portfolio. Teaching English with Technology, 21(4), pp.19-34.
• Harun, R.N.S.R., Hanif, M.H. and Choo, G.S., 2021. The pedagogical affordances of e-portfolio in learning how to teach: A systematic review. Studies in English Language and Education, 8(1), pp.1-15.
• Iwu, C.J., Ngcobo, N., McCaul, M., Mangqalaza, H., Magwaca, A., Chikte, U. and Wiysonge, C.S., 2020. Vaccine stock management in primary health care facilities in OR Tambo District, Eastern Cape, South Africa. Vaccine, 38(25), pp.4111-4118.
• Le, A.N., Bo, L.K. and Nguyen, N.M., 2023. Canva-based e-portfolio in L2 writing instructions: Investigating the effects and students’ attitudes. Computer Assisted Language Learning, 42(1), pp.41-62.
• Lei, Y., Zhang, J., Schiavon, C.R., He, M., Chen, L., Shen, H., Zhang, Y., Yin, Q., Cho, Y., Andrade, L. and Shadel, G.S., 2021. SARS-CoV-2 spike protein impairs endothelial function via downregulation of ACE 2. Circulation research, 128(9), pp.1323-1326.
• Loorbach, D., Frantzeskaki, N. and Huffenreuter, R.L., 2024. Transition management: taking stock from governance experimentation. In Large Systems Change: An Emerging Field of Transformation and Transitions (pp. 48-66). Routledge.
• López-Crespo, G., Blanco-Gandía, M.C., Valdivia-Salas, S., Fidalgo, C. and Sánchez-Pérez, N., 2022. The educational e-portfolio: preliminary evidence of its relationship with student’s self-efficacy and engagement. Education and Information Technologies, pp.1-16.
• Majdi, M.A., Dewantara, B.S.B. and Bachtíar, M.M., 2020, September. Product stock management using computer vision. In 2020 International Electronics Symposium (IES) (pp. 424-429). IEEE.
• Pearl, J., 2022. Direct and indirect effects. In Probabilistic and causal inference: the works of Judea Pearl (pp. 373-392).
• Saharan, S., Bawa, S. and Kumar, N., 2020. Dynamic pricing techniques for Intelligent Transportation System in smart cities: A systematic review. Computer Communications, 150, pp.603-625.
• Schrimpf, A., Shin, H.S. and Sushko, V., 2020. Leverage and margin spirals in fixed income markets during the Covid-19 crisis. Available at SSRN 3761873.
• Taghizadeh-Hesary, F. and Yoshino, N., 2020. Sustainable solutions for green financing and investment in renewable energy projects. Energies, 13(4), p.788.
• Vasilev, J. and Milkova, T., 2022. Optimisation models for inventory management with limited number of stock items. Logistics, 6(3), p.54.

Online

• Description of CIMA case study. 2024. Online. Available through: < https://obcmoodle.com/pluginfile.php?file=%2F44524%2Fmod_folder%2Fcontent%2F0%2FCIMA%20case%20study%20on%20cash%20flow%20.pdf&amp;forcedownload=1>
• Description of Duncan Bannatyne. 2023. Online. Available through: < https://obcmoodle.com/pluginfile.php?file=%2F44524%2Fmod_folder%2Fcontent%2F0%2FDuncan%20Bannatyne%20case%20study%20on%20funding%20%20.pdf&amp;forcedownload=1>
• Description of Jenny’s cafe. 2024. Online. Available through: < https://obcmoodle.com/pluginfile.php?file=%2F44524%2Fmod_folder%2Fcontent%2F0%2FCash%20Flow%20Statement%20-Jennys%20Caf%C3%A9_questions.docx&amp;forcedownload=1>
• Description of McDonald. 2024. Online. Available through: < https://obcmoodle.com/pluginfile.php?file=%2F44524%2Fmod_folder%2Fcontent%2F0%2FMcDonald%E2%80%99s%20case%20study.doc&amp;forcedownload=1>
• QCF, 2024. What tax does a limited company pay? [Online] Available through < https://www.qualitycompanyformations.co.uk/blog/what-tax-does-limited-company-pay/#:~:text=The%20current%20rates%20of%20Corporation,the%20portion%20above%20%C2%A350%2C000) >
• TaxAid, 2024. National Insurance Thresholds. [Online] Available through < https://taxaid.org.uk/guides/information/an-introduction-to-income-tax-national-insurance-and-tax-credits/national-insurance/national-insurance-for-employees-and-employers/national-insurance-thresholds#:~:text=If%20you%20earn%20between%20the%20Primary%20Threshold%20and%20the%20Upper,242%20from%206%20July%202022 >
• Wise, 2024. VAT Rate in the UK. [Online] Available through < https://wise.com/in/vat/gst/uk >