Understand the sources of finance available to a business.
1.1 identify the sources of finance available to a business
1.2 Assess the implications of the different sources
1.3 Evaluate appropriate sources of finance for a business project
Understand the implications of finance as a resource within a business.
2.1 Analyse the costs of different sources of finance
2.2 Explain the importance of financial planning
2.3 Assess the information needs of different decision makers
2.4 Explain the impact of finance on the financial statements
|Assignment 1: Finance as a resource |
Assessment criteria coverage – (LO1 – 1.1, 1.2 and 1.3)
Assessment Criteria Coverage – (LO2 – 2.1, 2.2, 2.3 and 2.4)
The following case study is taken from The CityA.M Newspaper
EasyJet founder will vote against Airbus purchase
Founder of budget airliner easyJet Stelios Haji-Ioannou has said he will vote against a management plan to buy 135 Airbus SAS jets, valued at $13.2bn, citing a lack of transparency to the transaction.
Haji-Ioannou, who owns just under 37 per cent of the company, said “it is my firm opinion that this is a good deal for Airbus and a bad deal for shareholders”. The decision will be put to vote on 11 July 2013.
I am not against replacing aircraft that have reached the end of their economic life. However, I am against buying aircraft that are three times more expensive than the ones I bought with my own money in the early 2000s.
Task 1 :
Prepare a report to the Board of directors at EasyJet covering the following areas;
1.1 Identifies the sources of finance available to a business
1.2 Assesses the implications of the different sources
1.3 Evaluate appropriate sources of finance for a business project – Purchase of Airbus SAS Jets – per case study above
2.1 Analyses the costs of different sources of finance – To EasyJet if they decide to buy the aircraft
Report length – approximately 1000 words
Your report should include within the introduction of the report a brief review of the following areas;
· How long has this organisation been in existence
· How big is the organisation in terms of assets owned and controlled; scope of service provided.
· Is the organisation a private or public company
The above review will help to set context for available sources of finance.
The chairman of the Board of directors at EasyJet has asked you to prepare a report on the following areas, for the incoming Non – Executive directors to the Board, who have very little financial knowledge.
2.2 Explain the importance of financial planning – For a company Like EasyJet
2.3 Assess the information needs of different decision makers – Managers at EasyJet (various levels of management – Strategic, Tactical and Operational managers), Loan and Equity providers to EasyJet.
2.4 Explain the impact of finance on the financial statements – Financial statements produced by EasyJet.
AC 2.2 – Financial planning entails things like preparing budgets (capital, revenue and cash), organizing appropriate sources of finance for the organization and how to invest these sources of finance. Financial plans should help managers to plan, control and monitor the activities of the organization. Here you could focus on the importance of cash budgets when dealing with expected cash flows for the organization or alternatively you could focus on the importance of planning the sources of finance the company will use when implementing its activities.
AC 2.3 – Here you need to assess the information needs of different decision makers. You could look at the information needs of different levels of management at an organization like EasyJet and possibly the information needs of investors or bankers who have or potential could lend finance to the organization. Think about why they would need this information, what are their claims on the organization.
AC 2.4 – Here you will be required explain the impact of finance on the financial statements, so for instance how different types of finance and their costs appear in the financial statements of a company like EasyJet.
The following financial statements for EasyJet can be used to help your explanation:
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