Managing Financial Resources

Section 1) Introduction

In order to make expansion in Hussein Contractors, there should be suitable sources of finances decision for conducting it. The failure to make the right decision will cost Hussein Contractors resulting in business failure to meet financial obligations. Therefore, the sources of finance suggestion should be according to the needs of Hussein Contractors along with possibility for meeting such obligations.

Hussein Contractors should make use of sources of finance that shows benefits rather than complicated payback. This will ensure well-being of the organization without affecting their internal process and financial status.

The sources of finance that requires payback and high interest forms will tire the company process along with poor actual financial position. This will influence long-term basis need for expansion.

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Section 2) Sources of Finance and Implications

The sources of finance that are available for Hussein Contractors are sales of assets, government assistance and share capital. These are not the only sources of finance but it is most suitable applicable for adopting either one of them or all.

Once the source of finance did not fulfill expansion needs then Hussein Contractors can adopt another one to fulfill. It is about implementing more than one source of finance when the company needs not achieved.

2.1) Sales of Assets

Sales of assets refer to fixed assets that an organization can sell it off, which is not in use by them for a long period. It is the means to raise funds by either auctioning or selling at a fixed rate. It will help in developing more profitable ventures (Brumfitt, K., Barnes, S., Jones, J., & Norris, L., 2001).

Hussein Contractors will have various assets that are in stock reserved for potential use from completed contracts and projects. The sales of these assets will help in funding expansion program. It will not include any kind of risk that will affect the reputation or continuation of Hussein Contractors in the future due to failure to meet financial obligations.

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The value of assets is also depending on determination of the market needs. For example, if the asset sold is in wanted items and shows less number of availability in the market then Hussein Contractors will be able to get good price for it but not very close to actual purchase price. Therefore, Hussein Contractors should make careful analysis of assets they want to sell with prioritizing of selling first or last.

Some of the assets are furniture, building, electronics, etc. The asset that will provide high value is land or building because most of the time the value is increasing rather than decreasing. Therefore, Hussein Contractors will gain high value and good amount of funding in their expansion needs.

Some of the organizations make projection of revenues. This will analyze certain value of assets in the future. The value will not show exact while but it is determination and projection with potential similar value obtainment. The projection of value can increase or decline depending on market value and needs value.

2.2) Government Assistance

Government assistance is encouragement for particular company or organization with financial support and funding their activities. This assistance is in the form of grant or gift that the organization do not have to return (Buckle, M., & Thompson, J. L., 2004).

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Hussein Contractors can make use of government assistance, which will be excellent form of source of finance. This is possible by contacting various government offices and sections that are offering assistance financially for expansion needs. There might need for undertaking or presenting Hussein Contractors plan and description for expansion.

The reason is for convincing any of the government offices for funding expansion needs and how it will benefit the people in the society or community. There will be no payback, interest or any kind of risk involving when taking government assistance. This will create improvement in the company image when Hussein Contractors is obtaining government assistance proving their importance in the society or community.

For example, the marketing professionals can contact and communicate with the government offices. They should contact particularly the government offices that they are aware of funding company activities. It can be one or more government office seeking for financial assistance. There are investment departments that government offices opened for financing project and expansion needs of companies. There will need for submitting documents, plans and projected forecasts, which is for review of investment department before obtaining government assistance.

The marketing professionals should be ready with expansion plan that is focusing on benefit for the people and the community, presentation, etc. This will allow immediate communication and funds obtaining. They should make sure that they are doing their maximum because this source of finance is very important.

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The below figure 1, represents an example of sources from government assistance (Command and House Paper Beta, 2010):

Figure (1): Local Government Funding by Source

2.3) Share Capital

The means of selling shares can allow raising funds. Therefore, the person who is buying shares from the company will be becoming essential part of the organization. The people who are buying shares will be receiving dividends such as part of the profits of that particular company (Banjerjee, B., 2005).

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The raise of money from the people will increase productivity but it will limit their profit saving for future references. However, most of the companies adopt this because it is the easy form to obtain finance for companys needs. There is need for dividend paying for shareholders, which is taking part of future funds of Hussein Contractors.

For example, when Hussein Contractors market value is down or not up to the standard, that issue of shares is not suitable because they will not be able to obtain funds. Most of the companies use this source of finance when they have strong reputation in the market such as market leaders or large size firms, which will assure guarantee to obtain funds.

Therefore, if Hussein Contractors is planning to make use of this source of finance then marketing and sales department should work towards making strong advertisement and market awareness. This will create market awareness and it will enable possibilities to obtain people to buy shares. However, this form of source is suitable for new businesses not existing businesses that is not showing high reputation in the market.

Section 3)

Costs Assessment and Evaluation

The analysis of costs is possible by determining revenue generation from the source of fund such as revenue deducted with costs and the result will be loss or profit. Hussein Contractors will adopt and implement source of finance that is having less cost and proving to result profit than loss. Page 6 of 14

Managing Financial Resources

Source of Finance 1) Sales of assets Assessment and Evaluation Impact The costs will be when The benefit will be medium communicating and transacting but not high. The reason is for sales of assets. Moreover, due to achievement of funds Hussein Contractors will not from assets that is not similar obtain the actual price of the to actual costs. The selling assets but less than the market price will be very lower to 2) Government assistance value. The cost assistance marketing, presentation, etc. in will actual price. government The benefit will be high and be when opportunity for Hussein

preparing Contractors. However,

there are no costs of return or interest rates to payback. The finance receiving shows total 3) Share capital benefit. There will be cash receiving The impact is unknown and it depending on share value and is depending on market value when there is decline then it will of Hussein Contractors. not be effective. will be Hussein sharing

Contractors

profit with the shareholders. According to the above assessment and evaluation, it shows that there are most of the benefits for each sources of finance. The management should make decision as per capabilities and interest of obtaining funds. However, the high

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Managing Financial Resources

assessment results are for government assistance that is showing more benefits and advantages for Hussein Contractors.

As per the needs evaluation, the possibilities of suitable source of finance can be sales of assets or government assistance. Share capital is not suitable due to Hussein Contractors not being leader in the market or representing as big firm. When government assistance does not show effectiveness of results and funding then Hussein Contractors have choice for sales of assets. The evaluation of advantages and disadvantages made is according to Hussein Contractors needs and importance for suitability determination.

The advantages and disadvantages evaluation will show effectiveness of each source of finance:

Source of Finance 1) Sales of assets

Advantages Clearance of unused assets Identification of assets market value Sale before asset becomes unsellable or decline in the value

Disadvantages Not actual rate or as per market value Other costs for selling Potential for total loss Not obtaining appropriate funds No value or rate due to damages in the asset such as furniture or

electronics As per the evaluation made, it shows that sales of assets will not provide Page 8 of 14

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appropriate funds. This is depending on the available assets and if it is high quantity unused then there are potentials for obtaining suitable funds. 2) Government Obtain reputation in the Takes time and assistance market More than one government office to help Create employment opportunities Complete funding of the expansion Potential for future expansion funding There are more advantages than disadvantages. This shows that government assistance is effective form of obtaining funds. At this point, Hussein Contractors can obtain the maximum and overcome potential financial turndown. 3) Share capital Wide range of funders No one to buy shares Limited costs High funding due to poor market value Profit sharing Fall of market share affects future decisions Share capital form of obtaining funds might not be suitable in the case of Hussein Contractors. The need for expansion is due to need for growth in the profit. resources to convince or communicate Needs highly professional negotiators

Section 4)

Recommendation

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The sources of funds Hussein Contractors can use for factory expansion. The source will be government assistance. This is the most suitable form for factory expansion rather than others such as day-to-day operations or vehicle financing. These two options will not fit in criteria of government offices to fund activities because it will not show the maximum benefit for the people and the community.

Government assistance will fund these kinds of expansion because it will create employment opportunities and reduce unemployment. If the factory expansion requires realistic funds and provides suitable level of employment then this will attract government offices to fund immediately. Moreover, the government offices have annual plans to fund local needs of companies that are benefitting the market and the people.

The reason for recommending is that it will help Hussein Contractors to make business expansion within their offering and there is opportunity to obtain funds. It will increase their market value due to expansion and employment opportunities. At the same time, the government office will receive grants and eminent.

The expansion of the factory will allow generating more sales and profits. Therefore, this will enable to have source of finance from savings of profit for future expansion and business growth at Hussein Contractors. We can say that expansion of the factory will become as projected source of finance for potential development of Hussein Contractors.

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In the future, when there is growth and expansion of Hussein Contractors business then they might consider for share capital source of finance. There will be good market reputation and image and it will be easier to issues shares and obtain good number of shareholders. This shows that companies should work towards obtaining funds and make projection for potential needs and potential sources. This will allow enough time, resources and fund obtaining without complications.

The process of expansion and obtaining funds respectively takes ample amount of time. Therefore, it is advisable that Hussein Contractors should work towards various sources of finance ahead of 12-24 months. This form of implementation will reduce risk and will allow making careful study and analysis on various sources available and attainable.

Hussein Contractors should decide the size of factory expansion along with reserve amount from source of finance. This is to ensure that use of fund made is not at the maximum that when facing issues there will be need for immediate funding affecting operations of Hussein Contractors.

Section 5)

Conclusion

There are various sources of finance but it is depending upon the implications whether these sources are suitable or not. Therefore, there is need for identification of some of the sources that companies can obtain funds for their business growth.

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Out of all the sources, the company will evaluate current selected sources of finances. This is to make sure for the selection of the best available source so that it will allow eliminating potential risks and harms to the business. Sometimes, the businesses are adopting risky with measures to overcome it due to high advantages and benefits of that particular source such as bank loans.

There are three sources that Hussein Contractors can obtain funds for their business expansion. All these three sources might be or might not be suitable even after decision-making. Therefore, the fundraisers at Hussein Contractors should prioritize the form of source that they should apply first and following others when they are not able to obtain funds.

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Section 6) Bibliography

Banjerjee, B. (2005). Financial Policy And Management Accounting. New Delhi: PHI Learning Pvt. Ltd.

Brumfitt, K., Barnes, S., Jones, J., & Norris, L. (2001). Business Planning. New York: Nelson Thornes.

Buckle, M., & Thompson, J. L. (2004). The UK Financial System: Theory And Practice. New York: Manchester University Press.

Command and House Paper Beta. (2010). Local Government Funding by Source. Retrieved 15 October 2010 from

http://sandbox.opsi.gov.uk/paper/barker_review_of_land_use_planning/chapt er/7

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