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The Introduction To Sources Of Finance Finance Essay

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Date added: 17-06-26

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Often the hardest part of starting a business is raising the money to get going. As a newly appointed Finance Manager of Melaleuca Refugee Company distributor in Malaysia with the Head office at Bangsar, Kuala Lumpur, present an idea of how to turn it into a successful business by having other outlets.

You need to decide:

How much finance is required? When and how long the finance is needed for? What security (if any) can be provided?

The finance needs of a start-up should take account of these key areas:

Set-up costs (the costs that are incurred before the business starts to trade) Starting investment in capacity (the fixed assets that the business needs before it can begin to trade) Working capital (the stocks needed by the business- e.g. raw materials + allowance for amounts that will be owed by customers once sales begin) Growth and development (e.g. extra investment in capacity)

Task 1

Make a thorough research on the above company. Identify and briefly explain the sources of finance available for the expansion in the distribution of its line of products and highlight the implications of such sources of finance.

Task 2

From the above, explain the importance of financial planning for Melaleuca Products and describe the impact of finance on the financial statements.

Task 3

Obtain a Financial Statements of the company showing its two (2) consecutive latest annual statements. Compute for its profitability and liquidity ratio. Compare and comment on the result of your two (2) years calculations.

Task 4

Analyze Melaleuca's business environment through its consolidated results as shown in the Financial Statements.

Table of Content





Task 1

4 - 6

Task 2


Task 3

8 - 10

Task 4

11 - 17




19 - 20


21 - 22


Finance is the study of how and under what terms savings (money) are allocated between lenders and borrowers. Finance is distinct from economics in that it addresses not only how resources are allocated but also under what terms and through what channels. Financial contracts or securities occur whenever funds are transferred from issuer to buyer. Real assets are tangible things owned by persons and businesses such as residential structures and property, major appliances and automobiles, office towers, factories, mines, machinery and equipment. On the other hand, financial assets are what one individual has lent to another such as consumer credit loans and mortgages. The household is the primary provider of funds to businesses and government. Households must accumulate financial resources throughout their working life times to have enough savings (pension) to live on in their retirement years. Besides that, financial intermediaries transform the nature of the securities they issue and invest in. These include banks, trust companies, credit unions, insurance firms and mutual funds. On the other hand, market intermediaries simply help make markets work which include investment dealers and brokers. Funds can be channeled from saver to borrower in three ways which are direct intermediation, direct transfer from saver to borrower or a non-market transaction; direct intermediation, a market-based transaction usually through a market intermediary such as a broker; indirect claims through a financial intermediary, where the financial intermediary such as a bank offers deposit-taking services and ultimately lends those deposits out as mortgages or loans. (247 words) Task 1: Make a thorough research on the above company. Identify and briefly explain the sources of finance available for the expansion in the distribution of its line of products and highlight the implications of such sources of finance.

1.0 Introduction to Sources of Finance

Sources of finance are ways in which a business can get additional funds in order to finance various things. These include start-up, for example raw materials, machinery and buildings; expansion, for example buying more equipment and larger buildings; and to help with cash flow problems, for example in periods when the business is short of cash. The business will have two main categories to choose from. These are internal sources of finance and external sources of finance. Internal Finance is the money that comes from inside the business itself whereas External Finance is the money comes from outside the business. Examples of internal finance are retained profits, sales of assets and owner's savings. On the other hand, bank overdraft, a trade credit, a bank loan, leasing, hire purchase, mortgages, the issue of shares, debentures, and factoring are the examples of external finance.

2.0 Melaleuca Refugee Company Profile

Melaleuca Refugee Centre Torture and Trauma Survivors Service of the NT Incorporated is a community-controlled, not-for-profit association operating out of Darwin. The association was first established in 1996 as the Torture and Trauma Survivors Service of the NT Incorporated to cater for the small number of refugees and asylum seekers wanting to settle in the Northern Territory. In 2002, it expanded and became known as the Melaleuca Refugee Centre Torture and Trauma Survivors Service of the NT Incorporated (Melaleuca Refugee Centre).

3.0 Sources of Finance of Melaleuca Refugee Company, Malaysia

The company receives significant grant funds from both the Federal and Northern Territory Governments to provide various assistance and support services to refugees and the survivors of torture and trauma and their families. Government Grant is a financial award given by the federal, state or local government to an eligible grantee. Government grants are not expected to be repaid by the recipient. Grants do not include technical assistance or other forms of financial assistance such as a loan or loan guarantee, an interest rate subsidy, direct appropriation or revenue sharing. There is typically a lengthy application process to qualify and be approved for a government grant. Most recipients are required to provide periodic reports on their grant project's progress.

3.0.1 Australian government

(i).Department of Immigration and Citizenship (ii).Department of Health and Ageing (iii).Department of Families, Housing, Community (iv).Services and Indigenous Affairs

3.0.2 Northern Territory Government

(i).Department of Children and Families (ii).Department of the Chief Minister, Office of Multicultural Affairs

3.0.3 Foundations

(i).Honda Foundation There is gratefully acknowledging the Honda Foundation that generously sponsors a vehicle for use by Melaleuca. The foundation pays for the vehicle and servicing. This support demonstrates the Honda Foundation's good corporate citizenship and community support and is very much appreciated by all at Melaleuca. The Melaleuca-owned fleet comprises nine vehicles: five small four-cylinder hatches, one 10-seater bus, one utility and two larger sedans. The average age of the fleet is seven years. Average fuel efficiency per month is approximately 9.4km/ltr. Average distance travelled by a Melaleuca-owned vehicle is 1250km per month. The primary purpose of travel is to support or provide services to our clients. (ii).Deckcahir Cinema

(514 words)

Task 2: From the above, explain the importance of financial planning for Melaleuca Products and describe the impact of finance on the financial statements.

1.0 Impact of Finance

(i). Vision

Melaleuca Refugee Centre is recognized as a leader in facilitating the recovery of refugee survivors of torture and trauma.

(ii). Mission

Melaleuca Refugee Centre provides an environment for resettlement and healing of refugee survivors of torture and trauma, their families and community through confidential, high-quality and holistic services.

(iii). Responsibility of Committee of Management for the Financial Report

The Finance Manager for this company is Peter Trayte and the Assistant Finance is Emma Cameron. The members of the Committee of the Management are responsible for the preparation of the financial report and have determined that the basis of preparation to meet the requirements of the Associations Act 2003 and is appropriate to meet the needs of the members. The Committee of Management's responsibility also includes such internal control as the Committee determines is necessary to enable the preparation of financial report that is free from material misstatement, whether due to fraud or error.

(159 words)

Task 3: Obtain Financial Statements of the company showing its two (2) consecutive latest annual statements. Compute for its profitability and liquidity ratio. Compare and comment on the result of your two (2) years calculations.

1.0 Profitability Ratio of Melaleuca Refugee Company

Profitability Ratio




Net Surplus Margin

755,436 $ / 4,375,160 $

= 0.17 :1

937,325 $/ 5,090,820 $

= 0.18 :1

(Net Surplus / Sales)

Return on Total Assets

0 / 1,542,283 $

= 0

0 / 2,572,861 $

= 0

( Surplus Available to Common Shareholders / Total Assets)

Return on Equity

0 / 949,745 $

= 0

0 / 1,887,070 $

= 0

( Surplus Available to Common Shareholders / Equity)

Gross Surplus Margin

0 / 4.375,160 $

= 0

0 / 5,090,820 $

= 0

( Gross Surplus / Sales)

Table 1: Comparison of Profitability Ratio (Values extract from Appendix 1 & 2)

2.0 Liquidity Ratio of Melaleuca Refugee Company

Liquidity Ratio




Current Ratio

1,516,902 $ / 592,638 $

= 2.56 : 1

2,568,059 $ / 685,791 $

= 3.74 : 1

(Current Assets /

Current Liabilities)

Quick Ratio

(1,516,902 $ - 0 -0) / 592,638 $

= 2.56 : 1

(2,568,059 $ - 0 - 0) / 685, 791 $

= 3.74 : 1

((Current Assets - Inventories - Prepayment) / Current Liabilities )

Table 2: Comparison of Liquidity Ratio (Values extract from Appendix 1 & 2)

3.0 Explanation of the Comparison of the Profitability Ratios

(i). Net Surplus Margin

Both the ratio for the years 2011 and 2012 also to 1, which means that if there is 1$ of sales, then there will be 0.17$ surplus and 0.18$ surplus for the two years respectively. There can be seen that the net surplus margin for year 2012 is higher than the year 2012 by 0.01 on the above Table 1. This is because of the difference between the total income for the both years 2011 and 2012. This may due to the funding and donation for the company.

(ii). Return on Total Assets

There is 0 for the return on total assets for both years 2011 and 2012. This is because there is no shareholder for this company. Therefore, there is no existing for surplus available to common shareholders.

(iii). Return on Equity

As the same with the return on total assets, there is 0 for return on equity. The reason also like the return on total assets which is there is no shareholder for this company. There will be also no existing for surplus available to common shareholders.

(iv). Gross Surplus Margin

There is also 0 for the gross surplus margin due to without of gross surplus for this company. This may say that the gross surplus margin is not applicable for this company.

4.0 Explanation of Comparison of the Liquidity Ratio

(i). Current Ratio

From Table 2 on above, can be seen that there is both the ratio for the years 2011 and 2012 also to 1, which means that if there is 1$ of current liabilities, then there will be 2.56$ and 3.74$ of current assets for two respective years. It can be show that the current ration of the year 2012 is higher than year 2011. This may caused by the current liabilities of the year 2012 is much higher than the year 2011.

(ii). Quick Ratio

From Table 2 as shown on above, we can be seen that there is the same quick ratio with the current ratio for the both years which are 2.56: 1 and 3.74: 1 for the years 2011 and 2012 respectively. This occurred is due to the company is no existing of inventories and prepayment.

(581 words)

Task 4: Analyze Melaleuca's business environment through its consolidated results as shown in the Financial Statements.

1.0 Introduction of Business Environment of Melaleuca

Melaleuca have successfully reached and implemented a new Enterprise Agreement with staff and their union, which the overwhelming majority of staff supported. This was approved by Fair Work Australia in February 2012.The Committee of Management (COM) also engaged an external and independent consultant to review the structure and operations of the organization. The COM approved the consultant's recommendations, and a new operational structure that better suits the current needs of the organization was implemented in July 2012. As part of this restructure, they created a new position of Deputy Director to better support executive management in Melaleuca. Mary Taylor (current Deputy Director) joined Melaleuca at a challenging time during the restructure. COM members participated in a governance training workshop in February 2012 to expand our knowledge on the legal obligations of committee member and good governance practices. The COM is currently working in collaboration with key stakeholders and staff on the next strategic plan for the organization to help organization set its direction for the short to medium term. In the background to all this activity, government policies on refugees and asylum seekers continue to evolve.

2.0 Management & Staff of Melaleuca

The Committee of Management and staff of Melaleuca have a legal and moral responsibility to manage Melaleuca in the best interests of the community it serves. Committee of Management and staff demonstrate professional ethical behavior at all times in their responsibilities to the organization in their professional relationships with each other, and in their professional service to the community. Staff numbers at Melaleuca vary in relation to the centre's program cycles. However, for the day-to-day program implementation 40 staff members are employed. Dr Ali Nur has been the Director of the Melaleuca Refugee Centre since early December 2009. He studied Medicine in Somalia and has a Masters degree in Public Health from the University of Sydney. He worked with refugees from eastern Ethiopia from 1979 to 1982 and came to Australia on a scholarship sponsored by Community Aid Abroad. In 1983 he returned to Australia on a humanitarian visa. He trained health workers in remote Aboriginal communities and worked with the NT Health Department. Melaleuca Refugee Centre has a community-based Committee of Management (COM), which appoints the Director to manage the day-to-day operations of the organization. The role of the Committee of Management is to meet regularly to monitor the performance and management of the organization. The COM is elected from and by Associate Members of the organization and is responsible for setting strategic directions. The COM meets at least 8 times a year.

3.0 Counseling & Advocacy

The counseling team at Melaleuca Refugee Centre provides support, counseling and advocacy services to individuals and their families from refugee background. People who have experienced torture and trauma before coming to Australia might continue to suffer from effects of the prolonged exposure to human rights abuses, violence, war and physical hardship. Settling into a foreign country can be a very traumatizing experience. Melaleuca recognizes that people's pre-migration experiences and the process of resettlement are important to psychosocial well being. Melaleuca offers initial counseling upon arrival and long term counseling for those individuals or families in need. The Counseling & Advocacy Services are Program of Assistance to Survivors of Torture and Trauma, Newly Arrived Youth Support Services and Youth Program (YOUTH), Intensive Family Support Services (IFS) and Torture and Trauma Counseling (Detention) (T&T).

Counselors/advocates provide a safe, confidential and non-judgmental environment where people can talk about their experiences, both pre and post migration and can explore their strong feelings, thoughts, and memories. Reactions to trauma may include disturbed sleep, nightmares, panic attacks, feeling anxious, feelings of guilt and shame, feelings of hopeless or helplessness, and too much worry. People may be suffering many physical symptoms, the pain of loss of loved ones and homeland, and feelings relating to displacement and fear of future.

4.0 Forum of Australian Services for Survivors of Torture and Trauma (FASSTT)

The Forum of Australian Services for Survivors of Torture and Trauma (FASSTT) is a network of Australia's eight specialist rehabilitation agencies that work with survivors of torture and trauma who have come to Australia from overseas. There is one FASSTT member agency in each state and territory of Australia. The eight agencies in the FASSTT network offer direct services to survivors of torture and trauma, their families and communities. These include psychological assessments, individual psycho-therapeutic interventions, group and family therapy, youth activities, natural therapies and community development. FASSTT members also provide innovative and effective services to ensure that the Australian community can play an important role in diminishing the impact of torture on survivors and enhancing their opportunities to rebuild productive and meaningful lives. These services include professional development and capacity building for service providers (such as workers in the health, housing, education and settlement fields), networking, research, volunteer programs and case consultations.

5.0 Youth Supports & Services

Melaleuca's youth program provides a multi-function program, offering a holistic, timely and culturally appropriate service to young people of refugee and migration background aged 12 to 21 years. The youth program under RECONNECT supports young people who are at risk of homelessness and enhances refugee youth engagement with family, education, training and community. The youth team collaborates with other agencies to facilitate new networks for young people and provide them with important social connections and extra support. Melaleuca's youth team provides individual support, focused group work, school-based support, community development activities, capacity-building initiatives, and action-based research and holiday program activities.

6.0 Community Development of Melaleuca

Melaleuca delivers a range of community development programs underpinned by the key principles and values of Community Development: education, participation, democracy, advocacy and strategies of community empowerment and strengthening that build social capital and community capacity. In the case of survivors of torture and trauma, community development rebuilds resilience which may have been eroded by past experiences. Community Development accepts that the impact of torture and state-sanctioned violence may result in distrust and conflict, and aims to build social cohesion and strength. It identifies and builds on individual and community assets. It links the community with others in collaborative partnerships, and empowers individuals and communities who are particularly disadvantaged within the resettlement country. Community Development Programs are Families in Cultural Transition (FICT), Alternatives to Violence (AVP), Tips & Ideas on Parenting Skills (TIPS), Community Liaison, Training and Education and Refugee Support Network (RSN). Community engagement is strengthened through World Refugee Week, Annual Deckchair Fundraiser, Harmony Day, International Women's Day and Sea-Breeze Festival.

7.0 Past Events of Melaleuca

In the celebration of World Refugee Week, Melaleuca Refugee Centre hosted a community festival on 16 June 2012 with the theme of 'Restoring Hope'. The day highlighted messages that champion human rights locally and globally in a fun, sharing, relaxed atmosphere, and brought together the varied and vibrant cultures within their community. Highlights included a cultural village setting of world music and dance performances, traditional costumes, crafts, 'interactive' stalls, food tasting from around the globe, and activities for youth and children. 'Vibrant with community pride and spirit' sums up the atmosphere of the day. The festival truly showcased to the wider population what 'community' and being part of community means to people from a refugee background, and what refugees have to offer their adopted home in the richness of their experience and culture.

(1224 words)


As a conclusion, the objective of financial statements analysis is to show how to rearrange information from financial statements into financial ratios that provide information about five areas of financial performance which are short-term solvency, activity, financial leverage, profitability and value. Accounting statements provide important information about the value of the firm. Financial analysis learns how to rearrange financial statements to squeeze out the maximum amount of information. Business finance has three main areas of concern which are capital budgeting, capital structure and working capital management. The goal of financial management in a for-profit business is to make decisions that increase the value of the stock, or, more generally, increase the market value of the equity. The corporate form of organization is superior to other forms when it comes to raising money and transferring ownership interests, but it has the significant disadvantage of double taxation. There is the possibility of conflicts between stockholders and management in a large corporation.

(160 words)

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