UNIT 2: MANAGING FINANCIAL RESOURCES AND DECISIONS

UNIT 2: MANAGING FINANCIAL RESOURCES AND
DECISIONS

Unit 2:
Unit code: QCF level: Credit value:

Managing Financial Resources and Decisions
H/601/0548 4 15 credits



Aim

The unit aim is to provide learners with an understanding of where and how to
access sources of finance for a business, and the skills to use financial
information for decision making.



Unit abstract

This unit is designed to give learners a broad understanding of the sources and
availability of finance for a business organisation. Learners will learn how to
evaluate these different sources and compare how they are used. They will learn
how financial information is recorded and how to use this information to make
decisions for example in planning and budgeting. Decisions relating to pricing
and investment appraisal are also considered within the unit. Finally, learners
will learn and apply techniques used to evaluate financial performance.


1 2 3 4

Learning outcomes
Understand the sources of finance available to a business Understand the
implications of finance as a resource within a business Be able to make
financial decisions based on financial information Be able to evaluate the
financial performance of a business.

On successful completion of this unit a learner will:

BH023329 – Edexcel BTEC Levels 4 and 5 Higher Nationals specification in
Business – Issue 1 – April 2010 © Edexcel Limited 2010

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UNIT 2: MANAGING FINANCIAL RESOURCES AND DECISIONS

Unit content

1

Understand the sources of finance available to a business Range of sources:
sources for different businesses; long term such as share capital; retained
earnings; loans; third-party investment; short/medium term such as hire
purchase and leasing; working capital stock control; cash management; debtor
factoring Implications of choices: legal, financial and dilution of control
implications; bankruptcy Choosing a source: advantages and disadvantages of
different sources; suitability for purpose eg matching of term of finance to
term of projectHND Assignment Help

2

Understand the implications of finance as a resource within a business Finance
costs: tangible costs eg interest, dividends; opportunity costs eg loss of
alternative projects when using retained earnings; tax effects Financial
planning: the need to identify shortages and surpluses eg cash budgeting;
implications of failure to finance adequately; overtrading Decision making:
information needs of different decision makers Accounting for finance: how
different types of finance and their costs appear in the financial statements
of a business; the interaction of assets and liabilities on the balance sheet
and on international equivalents under the International Accounting Standards
(IAS)

3

Be able to make financial decisions based on financial information Budgeting
decisions: analysis and monitoring of cash and other budgets Costing and
pricing decisions: calculation of unit costs, use within pricing decisions;
sensitivity analysis Investment appraisal: payback period; accounting rate of
return; discounted cash flow techniques ie net present value; internal rate of
return Nature of long-term decisions: nature of investment importance of true
value of money; cash flow; assumptions in capital investment decisions;
advantages and disadvantages of each method

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BH023329 – Edexcel BTEC Levels 4 and 5 Higher Nationals specification in
Business – Issue 1 – April 2010 © Edexcel Limited 2010


UNIT 2: MANAGING FINANCIAL RESOURCES AND DECISIONS

4

Be able to evaluate the financial performance of a business Terminology:
introduction to debit, credit, books of prime entry, accounts and ledgers,
trial balance, final accounts and international equivalents under the
International Accounting Standards (IAS) Financial statements: basic form,
structure and purpose of main financial statements ie balance sheet, profit and
loss account, cash flow statement, notes, preparation not required; changes to
reporting requirements under the International Accounting Standards (IAS) eg
statement of comprehensive income, statement of financial position;
distinctions between different types of business ie limited company,
partnership, sole trader Interpretation: use of key accounting ratios for
profitability, liquidity, efficiency and investment; comparison both external
ie other companies, industry standards and internal ie previous periods,
budgets

BH023329 – Edexcel BTEC Levels 4 and 5 Higher Nationals specification in
Business – Issue 1 – April 2010 © Edexcel Limited 2010

9

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UNIT 2: MANAGING FINANCIAL RESOURCES AND DECISIONS

Learning outcomes and assessment criteria

Learning outcomes
On successful completion of this unit a learner will: LO1 Understand the
sources of finance available to a business

Assessment criteria for pass
The learner can: 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

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LO2 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

LO3 Be able to make financial decisions based on financial information

3.1 analyse budgets and make appropriate decisions 3.2 explain the calculation
of unit costs and make pricing decisions using relevant information 3.3 assess
the viability of a project using investment appraisal techniques

LO4 Be able to evaluate the financial performance of a business

4.1 discuss the main financial statements 4.2 compare appropriate formats of
financial statements for different types of business 4.3 interpret financial
statements using appropriate ratios and comparisons, both internal and
external.

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BH023329 – Edexcel BTEC Levels 4 and 5 Higher Nationals specification in
Business – Issue 1 – April 2010 © Edexcel Limited 2010

 

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UNIT 2: MANAGING FINANCIAL RESOURCES AND DECISIONS

Guidance

Links
This unit links with the following units within this specification Unit 6:
Business Decision Making, Unit 9: Management Accounting: Costing and Budgeting,
Unit 10: Financial Accounting and Reporting, Unit 11: Financial Systems and
Auditing and Unit 12: Taxation. This unit also covers some of the underpinning
knowledge and understanding for the NVQ in Accounting as set out in Annexe B.
The unit covers financial topics essential for learners who would like a career
in this field and wish to gain membership of a professional accounting body.

Essential requirements
Learners will require access to financial and company reports.

Employer engagement and vocational contexts
Centres should develop links with local businesses. Many businesses and
chambers of commerce want to promote local business and are often willing to
provide work placements, visit opportunities, information about businesses and
the local business context and guest speakers. www.businessbritainuk.co.uk
www.fsb.org.uk provides information about business in Britain and has extensive
links to other business and business news sites. The Federation of Small
Businesses provides information, support and guidance about small businesses in
the UK.

BH023329 – Edexcel BTEC Levels 4 and 5 Higher Nationals specification in
Business – Issue 1 – April 2010 © Edexcel Limited 2010

11


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BH023329 – Edexcel BTEC Levels 4 and 5 Higher Nationals specification in
Business – Issue 1 – April 2010 © Edexcel Limited 2010

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