and Decisions

Assessor name : Peter Keeley

Via Turnitin on Moodle before 23:59PM

Learning Outcome

Evidence

(Page no)

AC 1.1

AC 1.3

Evaluate appropriate sources of finance for a business project

Task 1

7

Student signature:                                                               Date:

Pearson BTEC Level 4 HNC in Business (QCF)

                                                                Unit 2: Managing Financial Resources

and Decisions

HNC Assignment Brief

access sources of finance for a business, and the skills to use financial information for decision making.

This assignment consists of two parts i.e. Part A and Part B

Present your work in the form a business report for part A and B.

Suggested word limit for all tasks 3500 words (+/- 10%). Please note that there is no penalty if you exceeded the word limit and this is only for your guidance.

Scenario for Part: A

For Task 1:

You work as a graduate trainee for ABC finance Ltd, who provide a range of services for clients. One of your duties is the preparation of business plans. A client Freddy Patel intends to start a new business as a Sole Trader on 1 June 2016.

For Task 2

Freddy is to rent a small workshop where he intends to manufacture and sell high quality sports jackets based upon a unique design that the company has patented. He anticipates the following as likely to happen:

1. Freddy is financing his business using £50,000 of his own savings and £25,000 in the form of a business loan [interest rate = 10%] and an agreed overdraft facility of £45,000 and an agreed overdraft facility of £45,000 [interest rate 2 % per month],  Other data:

1. Set up costs – Machinery must be bought at a cost of £30,000 in the first month. He must also buy a van, which will cost £24,000 payable in 12 equal monthly instalments starting from January.

1. Rent of premises will cost £2,000 per month payable quarterly in advance.

1. Manufacturing – Freddy intends to work flat out and make 400 jackets per month. At present he can import the materials he needs at a cost of £60 per jacket. The materials needed for each month are to be bought monthly on one month’s credit.  Read more : Imperial College London Assignment Help

1. Freddy expects to make no sales in the first month, which thereafter will rise by 100 each month to a maximum of 400 per month. He is confident that he can sell all that he makes for £100 per jacket. However, he realises that he will have to offer 2 months credit to customers.

1. Freddy will have to employ certain staff and this amount to £3,600 per month, payable one month in arrears.

1. Other running costs are estimated by Freddy to be roughly £1,700 per month.

1. Freddy expects to make drawings of £2,000 per month.

1. Freddy has been advised that the assets are likely to lose 20% of their value in the first year.

1. The business loan plus 12% interest must be repaid 13 months after the business starts.

For Task 3:

 Freddy is considering investing in a labour saving machine. The associated costs and savings associated with this machine is given below. You are required to use 2 investment appraisal techniques and to assess the viability of the machine. You are to explain the significance of your findings.

 Data For Task 3 :

Machine 1 – This machine will have an immediate cost of £10,000, it will last 4 years and result in a labour saving cost of £3,000 per annum. The cost of capital is assumed to be 10%.

 TASKS to complete

 Task 1: (LO1: AC1.1, 1.2, 1.3 ):      Understand the sources of finance available to a business

Complete this task using the following scenario:

You work as a graduate trainee for ABC finance Ltd who provide a range of services for clients. One of your duties is the preparation of business plans. A client Freddy Patel intends to start a new business on 1 June 2016 as a Sole Trader.

1.1: Identify the sources of finance available to a business like Freddy Patel.  You need to do research in order to identify sources of finance.[ AC 1.1]

1.2: Assess the implications of the different sources of finance to a business like Freddy Patel. [AC 1.2]

1.3: Evaluate appropriate sources of finance for a business research project like Freddy Patel. [AC 1.3]