Analytical Report on Cash Budget, Accounting Equation, Listing Shares, Stakeholders and Profit vs Cash

This report provides insights on cash budget, accounting equation, listing shares, stakeholders and profit vs cash. It includes a cash budget for three months, benefits of listing shares, stakeholders of Marks and Spencer, and differences between profit and cash.

Analytical Report

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
Preparing a cash budget for the three months ending 31 March 2022........................................3
TASK 2............................................................................................................................................5
2.1 Defining accounting equation and its significance...............................................................5
2.2 Assessing the benefits of listing shares on recognized stock exchange................................6
2.3 Presenting stakeholders of a large listed company namely Marks and Spenser...................7
2.4 Differentiating profit and cash..............................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES .............................................................................................................................13

INTRODUCTION
Business finance implies for the money that is generated by owners with the motive to
fulfill financial needs or requirements. In order to ensure smooth functioning of business
operations and functions it is an accountability of manager to provide different departments with
enough funding. There are several sources of finance which can be employed by business unit
for raising funds such as shares issuance, bank loan etc. the present report is based on different
case scenarios which will develop understanding about the concept of cash budget and its
significance. Report also depicts how accounting equations can be used for presenting
relationship between assets, liabilities and owner’s equity. It presents the benefits which M&S
will enjoy after getting listed on stock exchange and details about stakeholders as well. Further,
it also highlights aspects on the basis of which profit and cash flow differs.
TASK 1
Preparing a cash budget for the three months ending 31 March, 2022
Particulars January February March
Cash inflows
Opening cash inflow 10000 6556 6481
Sales revenue 840 2410 1575
Total cash inflows 10840 8966 8056
Cash outflows
Purchase 2800 1500 1750

Electricity bill 285
Telephone cost 120 120 120
Fuel cost 65 65 65
Withdrawal 800 800 800
Purchase of computer for personal
use 499
Purchased a computer for business
purposes 720
Purchase of motor van 3200
Total cash outflows 4284 2485 6220
Cash deficit / surplus or closing
cash balance 6556 6481 1836
Balance bought forward 10000 6556 6481
balance carried forward 6556 6481 1836
Cash budget is concerned with paying attention on obtaining information regarding the
net liquidity available for the business so that accomplishing objective can become possible. On
the basis of above computed cash budget it can be specified that there are number of benefits
which can be derived by the enterprise through looking at presented table. It helps in assessing
the total cash expenditure conducted by firm for carrying forward its operational activities. It
aids to evaluate how effectively the requirement of business are accomplishing through utilizing

the available cash. In addition to this, the specified organization can as well derive the insights
regarding inflows of cash so that total available liquidity can be ascertained. On the basis of
presented information it can be said that company can get derived several distinct advantages
like formulating decision so that accomplishing objectives can become possible.
The strategic decision formulation through focusing on available and required sources so that
conducting arrangement through diverse platform can be done on time to meet contingency
needs in appropriate manner.
It becomes essential for the company to give focus on prevailing circumstance through
applying cash analysis by formulating budget in turn better outcome achieving ability can be
derived.This permits company to avoid debts by having capabilities to gain resourceful
information through preparing cash budget. It as well aids in estimating the cash balance
remaining at the end of particular period in turn having significant insights can be achieved. The
spending power of the company can be properly judged to e identify which component can be
eliminated to have smooth function by ensuring optimum utilization of resources. Identifying
potential debt with maintaining relevant in order to derive ability to coordinate with changing
circumstances (Nguyen and Razali, 2020). It makes able to the organization to have
communicated financial information through involving all crucial and realistic data by removing
all non cash elements for the purpose of having fair & accurate details.
On the other side, it should be taken into consideration by the organization to pay
attention on its limitations to avoid irrelevant consequences. The one of the significant drawback
which is required to be highlighted is to focus on having details that there is no limitation in
spending power which might negatively affect the processing of the company in order to get
stability in the sector. The credibility position of the enterprise get adversely influence from the
prevailing situation. In addition to this, it is need to emphasized that proper evaluation of
prevailing trend for the purpose of making proper evaluation.
From the evaluation of the above illustrated table it can be said that company need to focus on
prevailing declining trend which is reflecting reduced cash balance. The cash budget prepared
for the three months indicates that company is need to make changes in the executed pattern of
expenditure and put efforts in enhancing revenue for having stable position in the industry.

TASK 2
2.1 Defining accounting equation and its significance
Balance sheet is formulated on the basis of accounting equation which helps to provide
significant summary through ensuring balance between assets and liabilities. Financial position
basically comprises assets, liabilities and equity. Accounting equation refers to assets equals to
liabilities plus equity (What is accounting equation? 2021). The liability part of balance sheet
comprises both short & long terms such as trade payable, creditors, outstanding expenses, bank
long, long term borrowings, etc. Assets side includes both current and fixed which are trade
receivable, debtors, inventory, cash, equipment, machinery, etc. the equipment part of the
balance sheet involves retained earnings, etc. the balance sheet is formulated by focusing on
having double entry system which provides ability to record transaction in two accounts so that
covering overall picture of the business transaction.
From the evaluation it can be said that financial position get balanced due to the
application of accounting equation & double entry book keeping system. For instance- company
is purchasing machinery which will be recorded by in both accounts like cash and machinery. On
the basis of this, it can be specified that it allows to get the ability to get accurate, relevant,
reliable, etc kind of financial position statements in turn formulating decision in effective manner
can become possible.
2.2 Assessing the benefits of listing shares on recognized stock exchange
There are several benefits which large sized firm can enjoy by listing its shares on the
recognized stock exchange such as: Value creation: Facilitates market valuation of business in the best possible way which in
turn helps in attracting more clients. Access to capital: Through listing shares on stock exchange company can raise funds for
expansionary purpose (Explaining Benefits of Listing a Company on the Stock Exchange,
2021). It offers opportunity to the business unit to enhance capital by offering shares to
the potential investors.

 Enhance liquidity: In the context of business unit, liquidity can be reinforced by
providing shareholders with an opportunity in relation to realizing investment value. Ensures transparency and efficiency: Both the aspects are considered as highly
significant for organizational growth and success (Reiter, 2021). By listing shares M&S
can indulge transparency and efficiency as it is entitled to disclose all the relevant
information as per the rules applicable.
 Accountability enhancement: Listed companies possess effectual financial
accountability over others. Moreover, firm has accountability to be transparent and clear
with regards to its business dealings.
There are number of benefits which can be obtained by company through being listed on
the stock exchange. It inclines the ability to meet predetermined objectives so that accomplishing
in effective manner can become possible. Being listed on stock exchange not only provides
higher access to capital but increases the efficiency to give higher returns (Truant, Broccardo
and Dana, 2021). Along with the mentioned benefits it is crucial for the enterprise to emphasize
on having increased accountability so that responsibilities for the taken action in order to have
trustworthiness among the stakeholders. To be successful in the particular industry become easy
by gaining distinct benefits so that having competitiveness can become possible. Increased
exposure as well become possible for the company when it is listed on the stock market. From
the assessment it can be articulated that company can get higher abilities to get improved
performance due to availability of optimum utilization can become possible. There are several
components which can be attained like higher capability to deal coordinate with changing
circumstance.
Better visibility can be accomplished through being listed on the stock exchange. In
addition to this, conducting market analysis for having relevant for information. It aids in giving
depth insights regarding market information in turn better ability to get deeper exposure for
gaining differentiation become possible. On the basis of this, it can be specified that boosting
profile can become possible for the organization. Capacity to uphold b control as well can be
exerted by the listed company effectively as compared to the non listed company. On the basis of
provided information it can be said that higher profitability & sustainability can be achieved.

2.3 Presenting stakeholders of a large listed company namely Marks and Spenser
The listed company like Marks and Spencer has both internal and external stakeholders that
largely contribute in achieving success. The internal stakeholders include management,
employees and owner which play significant role in influencing the internal process of the
company (Pinkhasik and Herrmann, 2021). Marks and Spencer as being one of the successful
organization has large number of stakeholders that contribute in its overall performance.
Employees are responsible for accomplishing the roles & responsibilities. Accomplishing the
deadline of delegated assignment and accountability in turn higher performance can be achieved.
Management is considered to be crucial stake holder of the company as responsible for the
formulating policies strategies, structure, etc in order to get the leading position in the sector.
The external stakeholders areas well responsible in influencing the functioning of the
company in both positive and negative manner. It includes competitors, financial institution
suppliers, lenders, financial analyst, investors, etc. The specified stakeholder of the organization
refers to the published financial statements so that accurate information for taking decision.
Competitors take decision through looking at way of dealing with target audience in order get
higher market share. Investors pay attention on evaluating financial statement so that relevant,
reliable comparable., etc so that better insights to take strategic decision. Suppliers, creditors and
financial institution concentrate on having data of efficiency of paying debt with use of available
resources so that higher performance can be derived. (Schweizer, Walker and Zhang, 2019). On
the basis of obtained information regarding the past, present and future events through
eliminating irrelevant components so that accurate and proper information can be provided to the
stakeholders.
Customer is one of the crucial stakeholder for which company produces and sells its goods. It is
considered to be important as sales revenue of the organization is highly dependent on it.
Government agencies imposes number of rules and regulations law, etc. which are required to be
coordinated with prevailing scenarios in order to get higher extent of competitiveness. It can be
articulated that in order to avoid the irrelevant legal obligations it becomes essential for the
company to cope up with industrial law, government rules and regulation.
The internal and external stakeholders play crucial role in influencing business
processing of Marks & Spencer (Business stakeholders,2021.). It is important for the company to

have such strategy which is able of influencing positively to these mentioned stakeholder. It can
be done by applying relevant course of action so that higher profitability, good quality of
product, optimum utilization of resources, declining cost, eliminating bad debts, collecting
payments, overcoming obligations, etc can be helpful in satisfying. It can allow increasing
revenue, brand image, etc. in turn overcoming prevailing competition with help of getting
support from the stakeholder can become possible.
2.4 Differentiating profit and cash
No, the profit that a business makes is not a reliable indicator of its cash balance. Cash and profit
are different from each other.
Difference between cash flow and profit is enumerated below:
Basis of difference Cash flow Profit
Definition Any form of money which
can be spent to purchase
products or services. It
includes- coins, cheques and
currency. Inflow and outflow
of money at specific time
period is known as cash flow.
On the other hand, Any
financial gain or benefit,
especially the difference
between the money spent and
the money earned in
purchasing or producing
products or services. In other
words, it is amount of money
that the company gain and has
left after paying for their
expenditures.
Sources It is the amount of money
gain by company either from
vendors, investors or business
operations.
Whereas, Profit margins is
nothing but the money which
is left over after all the
expenditure of firm are being
paid.
Spending power Cash is the amount of money On the other hand, Profit is a

which need to be kept and
operated on daily basis.
Therefore, cash amount can
be spent to purchase goods or
services.
key indicator of company's
success so, to be successful
the company need profits
flow frequently. Thus, it is
said that profit are not meant
to be spent.
Manipulation Cash flow statements cannot
be manipulated easily
because management of the
company can utilize the
accounting standards
flexibility to increase
earnings and reduce
uncertainty as needed, so it is
difficult task to manipulate
the cash.
On the other side, The major
drawback of profit is that it
can be manipulated easily.
Profit manipulation falls
under the category of
financial statement
manipulation.
In other words, the reason
behind manipulation is that
the compensation of investors
is directly linked to the
financial position of the firm
(Naoum and
Papanastasopoulos, 2021).
So, they earn incentive to
maintain financial
performance in order to meet
goals and their personal
benefits.
Survival Cash flow is highly
influenced by the payment
timing into and out of the
organization (Muniroh and
Yuliati, 2021). Hence, it is
The profit is calculated before
the amount of money is
received. So, it is said that
profit margins is not critical

critically evaluated that cash
is essential to firm survival.
to company's survival.
Direction Cash is the money which is
utilized by the company as
source material to earn profit.
While, Profit of the company
tell the management team if
they are headed in the right
direction in order to achieve
success.
Calculation Cash flow statement provide
detailed information about
what went out and into of
company's bank account.
Therefore, from this the
company can calculate or
measure the ability to
purchase anything.
On the other side, profit
calculation is done by the
firm with the help of revenue
and expenses. So, they can
generate financial statement.
Sales on credit In cash statement, sales on
credit is only recorded when
the amount is received.
The accounting statement will
include sales on credit as
profit for product or services
which is delivered to clients.
Inventory The inventory is recorded in
the books of accounts as an
asset when the company
purchased it. Inventory goes
into cash flow statement
when the company pay it
(Noor-Ud-Din and et.al.,
2021). Hence, the purchase of
additional inventory in the
company requires the use of
The higher inventory turnover
will create great profitability
for the company. If the firm is
not focusing on inventory
turnover then profit cannot be
achieved.

amount of money.
In other words, additional
outflow of cash can impact
profit margins.
CONCLUSION
In this section, it can be summarized from evaluation that cash budget provides clear
presentation of inflows and outflows pertaining to specific time period. By preparing this,
business organization can take corrective measure for improvement purpose timely. Besides this,
it can be inferred that accounting equation furnishes accurate information about company’s
financial position. It can be seen in the report that firm can access more capital by listing shares
on recognized stock exchange. Further, it has been articulated that shareholders, management
team etc considered as major stakeholders of M&S. Both profit and cash flows differs to the
significant level on the basis of value creation, sources, calculation etc.

REFERENCES
Books and Journals
Muniroh, I. and Yuliati, A., 2021. Do Cash Flow and Accounting Profit Information Affect
Stock Prices?. Journal of Accounting and Strategic Finance. 4(1). pp.108-121.
Naoum, V. C. and Papanastasopoulos, G. A., 2021. The implications of cash flows for future
earnings and stock returns within profit and loss firms. International Journal of Finance &
Economics. 26(2). pp.2927-2945.
Nguyen, T.K. and Razali, M.N., 2020. The dynamics of listed property companies in
Indonesia. Journal of Property Investment & Finance.
Noor-Ud-Din, A. and et.al., 2021. Cash Flows or Profitability Measures: Which is Better Stock
Return Predictors?. Audit and Accounting Review. 1(1).
Pinkhasik, P. and Herrmann, P., 2021. Learning from external stakeholders: Evidence from two
railway projects in Germany. Project Leadership and Society, 2, p.100028.
Reiter, N., 2021. Investor communication and the benefits of cross-listing. Journal of Accounting
and Economics. 71(1). p.101356.
Schweizer, D., Walker, T. and Zhang, A., 2019. Cross-border acquisitions by Chinese
enterprises: The benefits and disadvantages of political connections. Journal of Corporate
Finance, 57, pp.63-85.
Tiew, F., Holmes, K. and de Bussy, N., 2021. Events’ external stakeholders and their influence
strategies in tourism: perspectives from Borneo. International Journal of Contemporary
Hospitality Management.
Truant, E., Broccardo, L. and Dana, L.P., 2021. Digitalisation boosts company performance: an
overview of Italian listed companies. Technological Forecasting and Social Change, 173,
p.121173.
Online
Business stakeholders. 2021. [Online]. Available through:
<https://courses.lumenlearning.com/boundless-management/chapter/business-
stakeholders/>.
Explaining Benefits of Listing a Company on the Stock Exchange. 2021. Online. Available
through: < https://enterslice.com/learning/benefits-of-listing-a-company-on-the-stock-exchange/
>.
What is accounting equation? 2021. [Online]. Available through:
<https://corporatefinanceinstitute.com/resources/knowledge/accounting/accounting-
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