unit 2: managing financial resources and decision

7/23/2019 Unit 2: Managing Financial Resources and Decision

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Chapter: 1Introduction

Day by day the competition within the business world is increasing with a

fast speed. So, now every business organization is trying up their best to

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compete with each other nec" to nec". #ut, if any organisation does not

utilize the sources of $nance for their di%erent funds and does not search

out for any reliable source for getting $nancial support, the organization

will not be able to manage or, run the business properly. &rom thebeginning of any business the $nance sources are the $rst prior able

factor. 'ot only that, the day to day running e(penses are also done by

the help of the $nance. )he salaries of the employees, their incentives,

the e(penditures for the e*uipments and so on are needed to be $nanced

by the funds of the organization.

)here are many $nancial sources for every business. +e have classi$ed

them into two sections: (ternal and internal. #oth sections have many

resources to get funds for running a business properly.

So, it is most important to plan the $nancial side of the business to be

able to "eep up the progress of the business. (cept this, if the $nancial

position of any business is not in a proper $gure the management of the

business will face huge draw bac"s.

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Chapter: -#ac"ground of the Study

-.1: b/ectives of this study: )here two types of ob/ectives of the

study.

Broader objective: )he broader ob/ective of this study is to understand

the importance of $nance for business.

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Specifc objective: the speci$c ob/ective of this study is to e(plore the

sources of $nance which are available to a business and another ob/ective

is to understand the proper implications of the sources.

-.- ethodology: &or ma"ing this report we have used +ebsites of the

company which we have chosen to analyze. +e have also used 2oogle as

search engine.

-.0 3rea of the study: +e collected information from )he o4cial

website of De""o group.

-.5 )arget group: &emale customers, who are aged about -1 to 56.

-.6 Sources: +e collected the information by using the corporate

website o Dekko group.

-.7 Scope of the report: )hese topics mainly deal with the things we

did during the ma"ing of this report. It is basically the overall view of the

De""o group8s $nancial planning for their business. During the study we

have gathered lot of ways of information of their business process and

$nancial sources.

-.9 imitation: )o ma"e this report we had some limitations. +e couldn8t

use the di%erent boo"s of business. +e had to use only 2oogle as search

engine to get the information our chosen company.

-.; <ationale of the study: #en/amin fran"lin said, “ An investment in

knowledge always pays the best interest.” (amous-ben-ranklin-

quotes-mone-fnance!

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Chapter: 0

rganisational overview

0.1 Company pro$le: De""o group is doing the business of

manufacturing and mar"eting of biscuits, snac"s, stic"y noodles, powder

drin"s, chutneys, oils and basic spices for over ; years. )hey also e(port

their products, especially the spices to 10 countries of the world. )heir

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manufacturing location is at Savar and their other departments li"e,

mar"eting, $nance, sales, commercial, I) and human resource managing

departments are located in their main head o4ce in Dhanmondi -9 =old>,

Dha"a.

0.- b/ectives of De""o group:

? Deliver ++ through taste? Spirit of &amily and &un

? mbrace and Drive Change

? #e 3dventurous, Creative, and pen@inded

? ursue 2rowth and earning

? #uild pen and Aonest <elationships +ith Communication

? #uild a ositive )eam and &amily Spirit

? Do ore +ith ess? #e assionate, Aonest and Determined

? #e Aumble =de""ofoods.com.>

0.0 ission:

)o provide great taste and deliver best to everyone. =de""ofoods.com.>

0.5 Bision:

ur goal is to ensure the availability of healthy food options for all parts of

the society. ur vision is to meet customers8 e(pectations and ma"e food

an easier, healthier and more en/oyable component of life.

=de""ofoods.com.>

0.6 roducts: De""o spices, De""o biscuits, De""o ascha,

De""o instant drin"s, De""o noodles, De""o snac" pac", De""ooil, De""o chutney.

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&ig:1: roducts of De""o

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Chapter: 5

3nalysis and Discussion

&or this report as we have chosen De""o group to wor" with, we have

$rstly identi$ed the e(ternal and internal sources of $nance to e(tend

their business.

De""o &oods imited is engaged in the manufacturing and mar"eting of

#iscuits, Snac"s, Stic" 'oodles, owder Drin"s, Chutney, ils and #asic

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Spices. )hey are *uite well "nown and in a competitive position in the

branded biscuits business both in #angladesh and abroad. )heir

manufacturing site is situated in Savar along with 16 employees

wor"ing over there. )hey also produce some of the best "nown creamvariants, plain and ingredients based biscuits. Since maintaining good

*uality products is their ma/or obsession, the *uality of their food products

provides the premium degree.

"ask:# $dentifcation and evaluation o Dekko%s internal and

e&ternal sources o fnance:

$nternal Sources o 'inance:

ersonal Savings: It is the amount of money which is being used by the

owner of the company to settle down hisher $nancial problems. Since

Dekko foods limited, is a private limited company which involves lots of

shareholders and it does not run by a single owner so personal savings

will not be a suitable source of $nance for De""o.

)etained rofts: +hen a company distributes all the dividends among

its shareholders, the remaining part of the pro$t is retained pro$ts. It is

also "nown as undistributed pro$ts of a company. 3s Dekko is a

developing food industry in #angladesh, so to capture the whole mar"et

they need to open more outlets inside the country. In that case, they use

their retained pro$ts for their company8s development.

*orking +apital: It is the sum of money that a business uses for its dailypurposes. It ensures that su4cient cash is available to meet day to day

cash re*uirements. 3 company gets this amount of money by deducting

all the current liabilities from its current assets. Dekko uses the wor"ing

capital by giving the wages of the labor every month and other

miscellaneous e(penses which includes their day to day activities.

Sale o f&ed ,ssets: &i(ed assets are the valuable items for every

company. )hese assets can be sold to raise $nance in typical situation for

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the business. +ith the help of selling $(ed assets a business can pay@o%

its debts and even $nance new activities. Dekko faces some $nancial

losses and to recover that loss of the business they sell their unused asset

which is a good source of $nance.

&ternal Sources o 'inance:

rdinar s/ares: Shareholders who are the owner of the company and

have the voting rights and have bear the loss and pro$t of the company.

3s Dekko is a private limited company they cannot issue ordinary shares

and they do not use this source of $nance.

reerence s/ares: )hese shareholders are the people who are not the

owner of the company and do not have to bear loss and have no voting

power but still the company have to pay dividend to their preference

shareholders even if the company are ma"ing small pro$ts. Dekko has

preference shareholders within their organization. )hey /ust issue shares

for their employees.

Debentures: It is a long term source of $nance with $(ed interest rates

and it has to be paid to the creditors on time even if there is no pro$t.

aunching new products is *uite costly and Dekko uses debentures while

introducing any new products in the mar"et.

Bank overdrat: It is a short term credit facility provided by ban"s to

withdraw more money than their ban" account balances hold. Dekko uses

ban" overdraft while giving the payments to their suppliers as the ban"

account does not have enough money all the time to pay them.

0oan: It is a large amount of money borrowed from the ban" by giving

interest every month. Dekko ta"es ban" loan for buying $(ed assets and

to e(pand their business. It is very useful source of $nance.

0ease: )his is a long term source of $nance. It is also "nown as long term

rent. )his long term rent can be ta"en for a long period of time and being

used in the business in returns of money. Dekko too" lots of land in leasewhile starting up their factories and manufacturing operations.

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1enture capital: )he Company which invests in other developing

companies to promote and in e(change they too" shares of the pro$t

made. 3s Dekko is doing *uite good business in #angladesh so they do

not need any venture capitalists.

"rade credit: +hen a company buys raw materials and other essential

items in credit and pays the money in later date is "nown as trade credit.

)rade credit is a short term e(ternal sources of $nance. Dekko uses trade

credit while buying raw materials from other businesses and pay them

later.

2rants: )he amount of money or fund given by the government to any

company to bene$t the community. 2overnment gave grant to Dekko for

opening factories in di%erent parts of #angladesh to diminished

unemployment.

"ask: 3(a! , new e&tension decision or Dekko group.

De""o group is manufacturing and doing mar"eting in the $eld of foods

and beverageF they can try up to e(tent their business with a new

decision. ,s4 investment counselors o Summit ltd. +ompan4 we

suggest Dekko group to e&tend t/eir business wit/ t/e marinated

ro5en oods6 w/ic/ would contain t/eir own manuactured spices.

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'ig: 3: 'ro5en oods

(b! ,nalsing t/e potential sources o fnance to e&ecute t/e

decision and t/e impact o t/ese sources in t/e downward

economic trend in t/e econom.

)he sources De""o group can use for e(tending their business are, bank

loan4 lease4 trade credit.

Bank loan: Dekko group can ta"e $nancial help from the ban"s. 3nd

they would need to repay bac" that money after a certain period of time

with a $(ed interest rate. )hey can ta"e the loan to buy the machineries

and necessary e*uipments to produce the frozen foods.

0ease: Dekko group can ta"e lease any area to use as their production

area for the frozen goods.

"rade credit: Dekko group can get support from their respective

suppliers. )hey can also ta"e the raw material for the frozen foods from

any new suppliers li"e, they can ta"e the chic"en from ,tab frm or

B),+ frm. +hen the suppliers will $nd the company reliable and has a

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good transaction, they would help the De""o group in producing the

frozen goods.

)here are also many other $nancial sources for Dekko group to raise the

funds for their new business e(tension. #ut, these sources would not be so

easier way to run the business.

1enture capital: 3s the Dekko group is e(tending their business through

introducing the frozen foodsF they won8t need to ta"e help from the

venture capitalists. Benture capitalists invest in those businesses which

are going to operate any new department.

2rants: )o get the grants from the government Dekko needs to do the

business more widely.

"ask 7 (a!: $mportance o fnancial planning:

3s an Investment Counselor for us $nancial planning will help determine

short and long@term $nancial goals and create a balanced plan to meet

those goals. ay be ro$t will always not be stable for a business in same

height but to maintain that pro$t $nancial planning will help to guide in

future. So $nancial planning is called a bac"bone of a successful businessand $nancial planning is very important for each and every business.

)here are some important points which have to be followed in $nancial

planning.

+as/ 'low: #usiness has to ta"e care of cash Gow and have to do early

budgeting. Cutting the e(penses, ta( planning and monitoring spending

habits as much as can will help a lot for cash Gow.

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+apital: )here should be a good capital base for shape a better $nancial

planning in future so that anyone can get interest easily to invest on the

business because, capital is one of the main element for starting a new

business.

$ncome: 3ll the income should be dividing in ta( payments, e(penditure

and in other monthly e(penses. <est of the money which will leave would

be the savings. So that it can help in futures and increase cash Gow.

'amil Securit: i"e before when a wor"er retired they used to get a

nice amount of pension which seems to be gone nowadays. In this case

family futures security depends on $nancial planning and also can get

help from di%erent "ind of policies which can smoothly $nd in mar"et

these days.

$nvestment: 3 better investment planning can ta"e the goal from the

dreams into the realities. Hust have to choose the right investment policy

in right time with planning.

Standard o 0iving: 3s li"e as family security, maintaining a good *uality

of living also depend in $nancial planning. +e never "now the future.

3nything can happen with the head of the family or may be lost income.

So having a savings through the family $nancial planning will help a lot

when it will need the most. It will wor" as a shell in hard time and improve

the familys standard of living.

'inancial 8nderstanding: Aaving full of control of $nancial lifestyle one

can easily have a ris" free investment in future and can retirement plansfor future with $nancial understanding and planning as well.

,ssets: #y $nancial planning have to ta"e care that build an asset would

not be une(pected $nancial burden on future. +e will forget in the /oy of

having asset but that may be able to come with liabilities. If we have a

proper plan of $nance from the beginning then easily can get the true

value of an asset.

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Savings: Savings can help in so many purposes in future. &or childrens

education, for retirement planning and une(pected emergency

occurrences can happen in any time. It has to be always very li*uid so

that it can be easy to convert that fund into cash and can be used.

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Chapter: 6

Case study

"ask 7.3 (a!: , situation w/ere Dekko aced cas/ in9ow and

out9ow problem.

In Huly -11, De""o faced an unwanted situation. 3s, de""o company uses

the )urmeric which are produced in the hilly area of Jhagrachari, which is

about 17,s*ft. During the rainy season all of a sudden the area where

the turmeric is being produced got Gooded and thus, they faced a huge

loss in the production. )hen, they again too" lease another area where

they started to produce the turmeric. During that time, they sold half of

their previous land. n that month, De""o faced loss of about 56 lacs

ta"a.

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ul ,ugust

Balance #& 1, ,

3dd: Cash receipts

Sales 1, ,

Sales of assets 0, ,

)otal <eceipts: 6, ,

ess: Cash payments

urchases 0, ,

)a( 1, ,

Interest 1, ,

)otal payments 6, ,

'et cash Gow: =56, ,>

'ig: 7: Sample cas/ budget

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Chapter: 7

&indings

"ask 7.3 (b!: "/e steps w/ic/ are s/ould be taken b Dekko to

overcome t/e situation.

anagement of De""o Company needs to prepare the budget

or the cash Gow more e4ciently. )hey need to do mar"eting on their products to attract or

grab the attention of general people.

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)hey need to ta"e trade discounts from the suppliers , which

can help them to reduce the operating e(penses. )hey need to focus more on their other products. )hey can ta"e debentures provided they should pay the

interest in time, ta"ing long term loans will help them to

$nance the de$cit they have incurred for the month of Huly.

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Chapter: 9

<ecommendations

"ask ;: Sources to get t/e reliable inormation or di<erent

e&ternal parties.

3 business cannot run by only one. )here are so many internal and

e(ternal parties involved in every business. 3nd every person involved

with the business can see the business8s $nancial statement or

information for their own necessary. eople who are not related directly

into the business but involved with it anyhow are called e(ternal users orparties, they include investors, suppliers or trade creditors, lenders,

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customers, government and they use the $nancial information to satisfy

their di%erent needs for information.

ressure 2roup: )hey are interested about the information because it

will help them determine whether the business is following the ethical

rules such as policies regarding treatment of disabled or payment of

creditors. De$nitely they want to ma"e sure that the business is not

e(ploiting the rights of any sta"eholder and they might decide to

pressurize the company operate in accordance to the rules re*uired to be

followed.

Suppliers or trade creditors: Suppliers or trade creditors are

interested for the information that business is eligible to pay their

obligation when they become due. )hey also want to "now about

business8s li*uidity.

0enders: )hey see" information that company is able to pay liabilities

when it comes mature. If it is loan then they want to "now company can

pay their interest on time and others information as in companies

pro$tability, li*uidity.

+ustomers: Some time customers have a long term involvement or

dependent on the company. 3nd get interest in information to "now about

the business stability. Customers also want to "now companies $nancial

history to ma"e sure they are choosing the best one for them.

2overnment: 2overnment are re*uire information to see that company

are income ta( payable and also paying other ta(es and maintaining otherpolicies regularly and not brea"ing rules.

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Chapter: ;

Conclusion

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In this report we have discussed about De""o8s internal and e(ternal

sources of $nance. Aere we have mentioned about De""o8s e(tended

pro/ect and also discussed about their di%erent e(ternal parties.

De""o is committed to diversity in a wor"ing environment where there is

mutual trust and respect and where everyone feels responsible for the

performance and reputation of their company. )hey are committed to safe

and healthy wor"ing conditions for all employees.

De""o is providing suitable products and services which consistently o%er

value in terms of price and *uality, and which are safe for their intended

use. roducts and services will be accurately and properly labeled,

advertised and communicated. De""o is establishing mutually bene$cial

relations with their suppliers, customers and business partners. De""o is

ma"ing continuous improvements in the management of our

environmental impact and to the longer@term goal of developing a

sustainable business.

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unit 2: managing financial resources and decision

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