1. Unit 2: Managing Financial Resources and
Decisions
Learning hours: 60
NQF level 4: BTEC Higher National — H1
Description of unit
This unit is designed to give learners a broad understanding of the ways in which finance is
managed within a business organisation. Learners will learn how to evaluate the different
sources of finance, compare the ways in which these are used and will learn how to use financial
information to make decisions. Included will be consideration of decisions relating to pricing
and investment, as well as budgeting. Finally, learners will learn techniques for the evaluation
of financial performance.
Summary of learning outcomes
To achieve this unit a learner must:
1 Explore the sources of finance available to a business
2 Analyse the implications of finance as a resource within a business
3 Make financial decisions based on financial information
4 Analyse and evaluate the financial performance of a business.
Content
1 Sources of finance
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 project
2 Finance as a resource
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
3 Financial decisions
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 cashflow
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
4 Financial performance
Terminology: introduction to debit, credit, books of prime entry, accounts and ledgers, trial
balance, final accounts
Financial statements: basic form, structure and purpose of main financial statements ie
balance sheet, profit and loss account, cashflow statement, notes, preparation not required;
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

2. Outcomes and assessment criteria
Outcomes Assessment criteria for pass
To achieve each outcome a learner must demonstrate
the ability to:
1 Explore the sources of
finance available to a
business
• identify the sources of finance available to a
business
• assess the implications of the different sources
• select appropriate sources of finance for a business
project
2 Analyse the implications of
finance as a resource within
a business
• assess and compare the costs of different sources of
finance
• explain the importance of financial planning
• describe the information needs of different decision
makers
• describe the impact of finance on the financial
statements
3 Make financial decisions
based on financial
information
• analyse budgets and make appropriate decisions
• calculate unit costs and make pricing decisions using
relevant information
• assess the viability of a project using investment
appraisal techniques
4 Analyse and evaluate the
financial performance of a
business
• explain the purpose of the main financial statements
• describe the differences between the formats of
financial statements for different types of business
• analyse financial statements using appropriate ratios
and comparisons, both internal and external
Guidance
Delivery
Understanding will be developed via exposure to a variety of case studies. It will also be useful
to look at a number of sets of financial statements. The form and structure of these statements
must be understood, although learners are not required to actually prepare the statements. That
said, simple examples which do require accounts to be prepared may aid understanding of the
formats.
Assessment
Assessment may be by way of case study or project, based on specific business organisations.
The organisations can be simulated, but learners may benefit from the analysis of a variety of
real organisations. Assessment of the decision making outcome is likely to require a simulated
case study.
Links
This unit links with other units within the specification: Unit 6: Business Decision Making, Unit
9: Management Accounting: Costing and Budgeting, Unit 10: Financial Reporting, Unit 11:

3. Financial Systems and Auditing and Unit 12: Taxation.
This unit also covers some of the underpinning knowledge and understanding for the following
units of the NVQ in Accounting at level 4: Contributing to the management of costs and
enhancement of value, Contributing to the planning and allocation of resources.
The unit covers financial topics essential for learners wishing to make a career in this field and
wishing to gain membership of a professional accounting body.
Support materials
Textbooks
Sufficient library resources should be available to enable learners to achieve this unit.
Particularly relevant texts are:
Cox D and Fardon M — Management of Finance (Osborne Books, 2003) ISBN: 1872962238
Dyson J R — Accounting for Non-Accounting Learners (Pitman, 2003) ISBN: 0273646834
Journals and newspapers
The financial and mainstream press can provide useful background reading, and can also be a
useful source of case studies and financial information. Copies of published financial reports are
available from companies themselves, or via The Financial Times (a free online ordering service
is available).
Videos
A number of videos is available covering the financial aspects of business.
Websites
The professional accounting bodies all have websites with lots of useful information and links.
The Financial Times website includes a free service providing copies of financial reports. Biz/ed
provides a wealth of useful resources aimed at learners and teachers.
www.aat.co.uk The Association of Accounting Technicians
www.accountingtechnician.co.uk Accounting Technician magazine
www.bized.ac.uk provides case studies appropriate for
educational purposes
www.ft.com The Financial Times