The company has been working towards achieving its objectives, and by the end of the financial year of 2010, the firm’s cash flow had increased by 26.5%, his increment was due to an increase in the firm’s operations, the amount of dividends a received by the firm and the decrease in taxation level. The company invested 989 million pound in licenses and a spectrum of 223 million pounds in turkey and 549 million pound in the Qatar market (Watson & Head 134). The Qatar market was funded by the IPO held in the country. The increase of 4.8% in operations was majorly due to working capital and the effects off foreign exchange. The capital expenditure declined by 247 million pounds, this was due to the low expenditure in the Indian market that generally offset the high spending in the South Africa’s market. The intensity of capital in Europe as a result of common functionality was rated at 11.3%.
2. Identification and critical evaluation of alternative sources of both short and long term business finance
Short term business finance is necessary based on the fact that they tackle the problems associated with immediate cash flow. These includes such purposes as the purchasing of the materials, payment of the hired labor, replenishing of stock, paying of immediate bills and so on. This is the reason why the short term business finance is important. The different sources include; Bank overdraft, Leasing, Credit cards, Trade credit, and Bank loans.
On the other hand there also the Long term financial sources. This is the capital needed for a long period of time, mostly more than five years to either start a business or expand an already established business. In most cases the capital is used in the purchase of land, machinery, buildings, and equipments. The financial sources includes; Owners capital, Grants from local or national government, Bank loans, Debentures, Sale of assets, Retained profit, Owners capital, and Share capital.
The widespread type of finances include lease, grant, venture capital, factoring, debentures, bank loans, shares, retained profit or earnings, bank overdraft, short term loans, hire purchase, and trade creditors. Lease involves a situation whereby a Company purchases an asset on behalf of a business and the asset is availed to the business for use but reserves the ownership of the asset. It can be either financial lease or operation lease. Grants are extended to firms whose services benefit the community and they are given by either the government or private organizations. The initial money raised at the inception of the business is the venture capital. Debentures are loans that are usually given to the company. They are different from other loans in that they have a fixed interest and a fixed repayment time. They may be secured or be based on the reputation of the company. The interests are usually deducted from the profits of the company. Debentures can either be registered or convertible. The former cannot be easily transferable because the legal procedures need to be followed. The later can be converted to become stock at the end of the agreed period. The other source is the normal bank loans which are more difficult to get particularly the long term loans. The interests on loans are a bit higher than debentures. Most of the loans are meant to serve the long term projects that the business wishes to undertake. Loans can be substituted with other sources of business finance that are less complicated and more suitable. Shares are also a source of finance, these can be ordinary or preferential and both are entitled to a portion of the profits at the end of the year though the preferential are the ones who are considered first. Retained profits also assist in ensuring that the business expands. The bank overdrafts are similar to other loans though the interest paid is only on the amount withdrawn. They are a form of short term credit of the account holders of a given bank. These allow the business to make a withdrawal that is more than the actual balance in the account. Trade creditors assists businesses so much becomes at times they deliver goods to the business without being paid and wait for some of the goods to be sold for them to collect their money. There is also hire purchase that gives the business a chance to use equipment or any other product before the full payment is done. The above discussed financial sources are some of the best to be adopted by any business. However, as mentioned each has its own advantage and disadvantage (Pike 79).
3. Applying financial management techniques and critically evaluating alternative methods of planning and control
The essence of managing one’s finances is very important; the skill is very significant as it ensures the firm’s stability in the days to come. There are a number of steps that can be taken to streamline the crucial techniques used in managing the finances of a person of a firm. It is very difficult implementing financial management techniques without having concrete goals for the firm (Manaj 124). Determining the position for the firm in years to come gives it the foundation and the channel to be followed so as to arrive at this specific point. Vodafone in trying to manage its finances ensures that the employees feel part and parcel of the whole operations and do work in team s for the realization of the firm’s set goals.
In 2005, the chief financial officer of the firm set forward to develop global financial vision for the firm. The chief’s objective was very clear; the firm would work towards aligning its 18 disparate and of essence the companies that were largely operating in autonomous by transforming them into a single unit that embraces innovative and pragmatic working conditions (Atrill 56). This meant that the firm would become a consolidated family that knows what it wants and what to do in order to arrive at it. The culture to be inculcated into this family would ensure that a wide threshold where individuals can exact a number of choices willingly. The foundation of all this is built on the firm’s believe that workers will be at ease and confident at the intra organizational level. This also is an indication of the appreciation of the management towards the work performed by employees.
Nevertheless the firm has built a strong foundation on the policy it utilizes in its operations. The firm is currently using a policy of borrowing; there is a mixture of both long term and short term capital market issuance. The borrowing that is employed by the firm is meant to enabler it meet the various funding requirements at its disposal. Together with cash that is generated from its operations, the firm loans these borrowing to a number of its internal operations. The firm generally aims at making a profit and increasing its operations. In order to make the realization of the firm’s objectives true, the firm is keen on ensuring that it builds a firm customer base. Across the world, Vodafone has an international customer base of around 34.1 million and it is continually seeking to develop innovative and new proportion that will help it deliver value and relevance to its customers thus building a relationship that is long lasting and able to meet their expectations and needs (Koller & Goedhart 78).
4. Assessment of the performance of a business from a financial and global business perspective
The UK listed company chosen was Vodafone. Group plc which is a telecommunications company that operates globally though its headquarters are based in Newbury UK. It is the largest telecommunication company in the world in terms of revenue and operates in more than thirty countries. It also holds some partnership networks in other more than forty countries globally. For example, almost half (45%) of the US based telecommunication company, Verizon wireless is owned by Vodafone. The company was founded in the year 1984 and since then it has grown to become what it is today. The major reason for its growth is the various strategies that it usually implements.
Recognizing the sources of finance in the balance sheet
The fixed assets are potential sources of finance since they can be sold; this is called the sales of assets
Fixed assets-142,766.
The Total equity shareholders fund rose from the year 2009-2010. This was as a result of a rights issue or share splitting.
Shares
Total equity shareholders fund, 2010 (90381) - Total equity shareholders fund, 2009 (86162) = 4219 (the funds raised).
Working capital
Current assets (14219) – current liabilities (11163) = 3056 in 2010
Current assets (13029) – current liabilities (9624) = 3405 in 2009
The above financing that was used by Vodafone as indicated in their balance sheet had some advantages. The working capital as generated in the two years has a number of benefits; it needs no repayment, there is no cost that is attached to it based on the fact that it is an internal source, it limits the influence that may be caused by external sources, and cannot increase the debt capital the firm has and as a result the gearing ration is preserved. Its major disadvantage is that it involves some opportunity cost. The other that may be used is the sale of assets and its advantages include; no payment of interests, any repayment needed, and large amount can be raised based on the type of fixed asset sold (Atrill & McLaney 34). The major risk is that sale of assets would mean that the business seizes to generate money. If the business requires buying another asset, it might spend more money than the initial value. As a result of the above mentioned source of business finance for Vodafone as well as others that were not mentioned the company has been doing well for a long time. Its growth in terms of income generation keeps on growing each year (Arnold 23).
Works Cited
Arnold, G. Corporate Financial Management. 3rd ed, Upper Saddle Revert Prentice Hall / Financial Times, 2005.
Atrill, Peter. & McLaney, Eddie. Accounting and finance: compiled from accounting: an introduction. Upper Saddle River: Pearson Education Limited, 2010.
Atrill, Peter. Financial management for decision makers, 5th ed. Upper Saddle River: Prentice Hall, 2009.
Koller, Tim. & Goedhart, Marc. Valuation: Measuring and Managing the Value of Companies. London: John Wiley and Sons, 2010.
Manaj, Anand. “Corporate Finance Practices In India: A Survey.” Vikalpa Journal. 27.4 (2002): 29-56.
Pike, R. and Neale, W. Corporate Finance and Investment, 6th ed. Upper Saddle River: Prentice Hall, 2009.
Pratt, Jamie. Financial Accounting in an Economic Context. London: John Wiley and Sons, 2010.
Weetman, P. Financial & Management Accounting. 3rd ed. Upper Saddle River: Prentice Hall, 2006.
Smith, M. Performance Measurement & Management. Upper Saddle River: Prentice Hall, 2006.
Watson D & Head A.Corporate Finance: Principles and Practice. 5th edn, New York: Core Text Publishers, 2010.
