ELECTRONIC ASSIGNMENT COVERSHEET

ELECTRONIC ASSIGNM
Course/Unit Information
Qualification Pearson BTEC International Level 3 Foundation Diploma in
Business
Unit No. Unit 3
Unit Name Business Finance
Unit Type Internal
Assignment Title Money, Money, Money! Investigate. Plan, improve!
Batch ONSITE BATCH

Instructor Information
Name Ms. Nadeesha Dilrukshi
Phone
Email nadeesha.d@westford.org.uk

Assignment Information
Schedule Code
Full/ Part Assignment Full Assignment
Date Assignment Issued 18/03/2024
Date Assignment Due 03/05/2024

Student Information
(To be filled by the student prior to submitting the assignment)
Name
Student ID
Email
Date of Submission

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 Student Declaration

I, _____________________ hereby confirm that this assignment is my own work and not copied or plagiarized.
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 Achievement Feedback Summary

Assessor’s Name
Grades
Pass Merit Distinction
Awarded

Learning Aim A: Explore types of business finance available at different stages in the growth of a business

A.P1
A.P1 Achieved /
Explain sources and suitability Not Achieved
of finance available in A.M1 A.D1 Evaluate appropriate
different business contexts. Analyze the types of business
types of business finance A.P2 Achieved /
finance required in a specific
business context applicable in a specific Not Achieved
business context. A.M1
A.P2 Achieved / Not
Explain sources and suitability Achieved
of revenue available in a A.D1
specific business context. Achieved / Not
Achieved

Learning Aim B: Understand how financial planning tools can be used to analyze financial data and assess business
risks

B.P3 Achieved /
Not Achieved
B.P3Explain the purpose of
B.M2
financial planning tools in
Analyze the factors that impact B.D2 Evaluate the impact of
reviewing financial data in a B.P4 Achieved /
on financial risks in a specific different factors that impact on Not Achieved
specific business context.
business context. financial risks in a given
B.M2
business context.
Achieved / Not
Achieved
B.P4 Perform appropriate
calculations using financial
planning tools to identify B.D2 Achieved /
Not Achieved
financial risks in a specific
business context.
Learning Aim C: Understand how financial statements for a sole trader are prepared and used to analyze and
evaluate business performance
 C.P5 Achieved /
C.P5 Prepare and interpret financial C.D3 Justify
Not Achieved
statements for sole trader C.M3 Assess business recommendations for
businesses. performance of a sole C.P6 Achieved /
improvements to business Not Achieved
trader by manipulating performance for a sole trader,
financial data and making C.M3
C.P6 Explain ways to improve suggestions for improving arising from own preparation Achieved / Not
profitability, liquidity and efficiency business performance and interpretation of business Achieved
in a given business context financial data C.D3 Achieved /
Not Achieved

Overall Feedback Summary

Overall Grade Date

[To Achieve a PASS, all P grade descriptors should be achieved; To achieve a MERIT, all P and M grade
descriptors should be achieved; To achieve a DISTINCTION, all P, M and D grade descriptors should be
achieved.]
Summative Feedback

Overall feedback on
current work with
emphasis on how the
student can improve and
achieve higher grades in
future.

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Assignment title: Money, Money, Money! Investigate. Plan, improve!

Learning Aim A: Explore types of business finance available at different stages in the growth of a
business

Learning Aim B: Understand how financial planning tools can be used to analyze financial data
and assess business risks

Learning Aim C: Understand how financial statements for a sole trader are prepared and used to
analyze and evaluate business performance

VOCATIONAL SCENARIO
(FOR LEARNING AIM A)

As a budding entrepreneur, itching to start your own enterprise, you realize that you need to
understand business finance. No enterprise is successful if the entrepreneur that runs it does not
understand finances i.e. where you can source finance from, where revenue can come from and
how this links to the objectives, size, and type of the enterprise that you are running.

Now is your opportunity to find out!

You will need to write a report (as this is also an important skill for an entrepreneur) to present
your findings.

TASK 1

You will need to research the different sources of finance and revenue that are available to
different businesses. You will need to research businesses:
 ● Of differing sizes (e.g. small, medium, large)

● At different stages of development (e.g. start-up, sole trader, partnerships, private and
public limited etc.)
● That have different business objectives (e.g. expand, develop products, develop in new
markets, relocate etc.)
● That offer different products (e.g. goods or services or both)

● That operate in different sectors (e.g. retail, electronics, health etc.)

In your report, you must include the following for the different businesses at the different stages of
their development:

● An explanation of the features of different internal and external sources of finance that are
available.
● How different sources of internal and external finance can be accessed

● An explanation of how the features of the different internal and external sources of finance
influence the decisions made.
● An explanation of the different sources and suitability of revenue that is available.

● An analysis of the similarities and differences in the approach taken by the different
businesses to securing business finance.
● The advantages and disadvantages, including the business risks, of the different types of
internal and external sources of finance.
● A judgement on how far different types of internal and external business finance meet the
requirements.
● An evaluation of how far the different types of internal and external finance meet the
needs of the different businesses.
● A conclusion determining the most appropriate types of business finance for the different
businesses at different stages of their development.

CHECKLIST OF EVIDENCE REQUIRED: An Individual Report

VOCATIONAL SCENARIO
(FOR LEARNING AIM B & C)

You are a budding entrepreneur, looking to further your financial literacy skills. A sole trader has
approached you and asked for your help. They want you to analyze the performance of their
business, identifying the current business risks and suggesting ways that their business
performance could be improved.

You realize this is a great opportunity for you to truly understand how financial information can
help a business monitor and improve their performance including how to prepare a formal
financial report.
Your report should include the following:
 Title
 An introduction to the details that are included in the report.
 Part One: Cash flow and break-even calculations and analysis, risks faced by the business.
 Part Two: Analysis of performance, conclusions, and recommendations

TASK 1

Choose a sole trader of your choice, but ensure you have access to the appropriate financial data.

You will need to present your findings in a financial report to the sole trader.

Write a title for your report and an introduction to the business.

Part One of your financial report must include:

 An explanation of the purpose of:

o Cash flow forecasts and statements
o Break even analysis.
for the selected sole trader
 An accurate cash flow forecast and statement and a break-even chart and calculation.
 Calculations and in-depth analysis using data from the sole trader’s cash flow forecasts and
statements and break even, to identify risks to the business. You should demonstrate your
understanding of common risks e.g. an increase in fixed or variable costs, a reduction in the
selling price, decline in sales revenue etc.
 A detailed examination of the factors that impact on the business risks.
 A broad range of conclusions and actions that the business could take to address these risks,
based on the analysis of your calculations.

Part Two of your financial report must include:

 An explanation of the purpose and the main components for sole traders of:
o Statements of comprehensive income
o Statements of financial position

 Using the financial data from the sole trader, you must prepare an accurate:
o Statement of comprehensive income
o Statement of financial position
These must be professionally accepted and in a vertical format.
  For both of the above statements, you need to make adjustments for:
o Depreciation
o Prepayments
o Accruals
o Changes in capital

 Accurate ratio calculations (measuring profitability, liquidity, and efficiency), using data you
have extracted from the above statements.
 An analysis of the business’s performance i.e. a detailed examination of the ratio calculations.
 A wide range of justified recommendations for improving the business’s performance, based
on the outcomes of the ratio analysis.

Checklist of evidence required:

Financial Report including:

 Cash flow forecasts and statements

 Break-even analysis
 Risks and possible solutions
 Statement of comprehensive income
 Statement of financial position
 Ratio analysis
 Recommendations on how to improve the business’s performance.

Submission Format:

The submission on the LMS is in the form of an individual written report. This should be written in a
concise, formal business style using single spacing and font size 12. You are required to make use of
headings, paragraphs, and subsections as appropriate, and all work must be supported with research and
referenced using the Harvard Referencing System. Please also provide a Reference List using the Harvard
Referencing System. The recommended word limit is 3000-4000 words, although you will not be
penalized for exceeding the total word limit.

Your Assignment starts from here.

Task 1:
Introduction:
Business Finance means the funds that are employed in the business. Business Finance includes all those
business activities that are related to the acquisition and conservation of capital funds to meet the financial
needs and overall objectives of a business enterprise. The fundamental necessities of business could be
fulfilled by finance for Example: to buy a plant or apparatus, or it could be to buy raw materials
(toppr, 2024)
The importance of business finance:
Capital is the most important tool when it comes to bridging the gap between your production and your sales.
Business finance can be used for a number of purposes. These include:
1. Financial Statements
When dealing with business finance, it’s important to go through your financial statements, including your
profit-and-loss statement, balance sheet, and cash flow statements. These reports provide an overview of
your business’s financial performance, By doing a financial analysis of these statements, you can see whether
you have enough working capital.

2. Strategic Planning

Every business should have a solid strategy in place. This is used for planning and providing the financial
groundwork for your projections and plans. If you are looking to expand your business, you will use business
finance to tell you how much you’ll have to spend to get things moving.

Managerial Finance:

Do you have enough funds to meet your financial obligations? Do you have the data available to forecast the
company’s budget, revenue, expenses, and profits? Will investing in fixed assets generate a return on
investment?

Management accounting and financial planning can help you forecast better and make financial decisions that
reduce risk and support the growth of the business.
(freshbooks, 2024)

Sources of finance:
sources of finance, refer to where a business gets money from to fund their business activities. A business can
gain finance from either internal or external sources. For well-established enterprises with shares or other
assets that may be used as collateral, obtaining internal capital is typically easier.

(bbc.co.uk, 2024)

Internal sources of finance:

Internal sources of finance are funds generated within a company from its own operations, such as retained
earnings, while external sources are funds obtained from outside the company, such as loans, bonds, and equity.
(bbc.co.uk, 2024)

Why do businesses use internal finance & advantages and disadvantages of internal finance?
Internal financing offers advantages such as cost-effectiveness, control retention, risk reduction, and
flexibility in managing funds.

One of the primary advantages of internal financing is its cost-effectiveness. Unlike external financing,
it does not involve any interest payments or fees. This means that the company can save a significant
amount of money that would otherwise be spent on interest and fees. This is particularly beneficial for
small businesses and start-ups, which may not have a lot of capital to spare. The Advantages Of
Internal Sources Of Finance are Low Costs, retention of control and ownership, No approvals
needed, and no legal obligations On The other side the disadvantages of internal sources of finance
are the limited amount of finance and constricted number of options.
(studysmarter, 2024)

Types of internal sources of finance:

There are 4 main types of internal sources of finance:

Retained Profit:
Retained earnings are the amount of profit a company has left over after paying all its direct costs, indirect
costs, income taxes and its dividends to shareholders. This represents the portion of the company's equity that
can be used, for instance, to invest in new equipment, R&D, and marketing.
(indeed, 2024)

Advantages:

Increased Stock Value:

Keeping your company earnings increases your Balance Sheet, which has a knock-on effect to
stockholder equity and corresponding stock value. Retained profit makes your business look better on
paper with more money in your accounts, in turn attracting further investment.

Funding Growth:
Another advantage to retaining profit is it gives you a fund for research and development. You can
reinvest your earnings into the company and drive growth. Retained profit can be brought forward for
multiple years to amass funding for reinvestment.

Financial Safety Net:

Holding onto excess profit also boosts your corporate liquidity. This lends stability to your business
with a financial safety net for any unexpected expenses. Should emergencies arise or the market take a
turn for the worse, your business has money in the bank to access without taking on new liabilities.
Sale Of Stock:
Sales refers to the exchange of a product, commodity, service or delivery for money. It involves
helping prospective clients or customers by listening to them and understanding their wants and
needs to find them what they’re looking for. Rather than persuading someone to purchase something,
selling is focused on meeting the needs of the customer objectively.
(indeed, 2024)

Working Capital:
Working capital is a financial metric which represents operating liquidity available to a business, organisation,
or other entity, including governmental entities. Along with fixed assets such as plant and equipment, working
capital is considered a part of operating capital.
(netsuite, 2024)

Asset Sale:
In an asset sale, the seller retains possession of the legal entity and the buyer purchases individual assets of the
company, such as equipment, fixtures, leaseholds, licenses, goodwill, trade secrets, trade names, telephone
numbers, and inventory. Asset sales generally do not include cash and the seller typically retains the long-term debt
obligations. This is commonly referred to as a cash-free, debt-free transaction. Normalized net working capital is
also typically included in a sale. Net working capital often includes accounts receivable, inventory, prepaid
expenses, accounts payable, and accrued expenses.