Financial Performance Analysis and Working Capital Management

Business Finance

Table of Contents
PART 1............................................................................................................................................1
Executive Summary ........................................................................................................................1
MAIN BODY...................................................................................................................................1
a. Profit and cash flow.................................................................................................................1
b. Working capital........................................................................................................................2
c. Changes in the working capital................................................................................................2
ii) Concepts used to present the financial aspects to manage the impact of concepts upon
financial results............................................................................................................................3
Analyse and recommend what steps should now be taken to improve this company’s cashflow
through better Working Capital management..............................................................................3
PART 2............................................................................................................................................4
Executive summary......................................................................................................................4
1. Purposes of preparing a budget, explanation of traditional budgeting approaches and
alternative budget methods along with their strengths and weaknesses......................................4
2. Application of budgets to plan future cost management of business.......................................7
3. Analysis of appropriateness of traditional or alternative budgetary systems..........................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

PART 1
Executive Summary
The particular case study mainly based on the Bright Lawns Ltd that face many issues
and analysis the financial performance of the organisation where consist of profit, cash flow,
inventory and many others. Through these activities know the actual position and take decision
regrading to investment.
MAIN BODY
a. Profit and cash flow
Profit: It describes as the financial benefit that gain by the organisation when they have
extra income as compare of expenses. It is a amount of the income left over after all the
important and matched expenses and less for certain period of time. As per the matching
principle all the expenditure were consisted to generate the income and identified in the given
period of time. Many time company face net loss when expenses exceed to income. Businesses
use three types of profit to analysis various places of an organisation (Baldock and North, 2015). Gross profit: To calculate this profit required to less variable cost from the revenues from
the every product line. For this profit does not require fixed cost such as equipment, plant
& HR department. An organisation comparison in the product lines to see which is most
profitable. Net Profit: For this profit consist of all costs that present right position of the company in
present time and how much money the business is creating. While, many times it may
misleading to top directors.
 Operating Profit: In this profit consisted of fixed and variable costs. For this includes
some financial costs which is called as EBITA. It is calculated by the mostly organisation
to know the amount of the deprecation, tax and amortization.
Cash flow: It is the net amount of cash and cash equivalents that move into and out of
business. In finance, the particular term utilise to define the net amount of cash which is earned
in particular accounting period of time. There are different kind of cash flow that is essential use
by the organisation to run and presenting financial analysis (Butler, 2016).
Difference between profit and cash flow:
1

Basis Profit Cash Flow
Tax There are tax amount paid after
calculation of the total profit then
paid it.
In the cash flow tax amount paid in
the instalments.
Statement To calculate the profit of the
organisation required to create
income statement.
To analysis the cash inflow and
outflow create cash flow statement
b. Working capital
Working capital: It is an indicator that presents the financial condition of the company
for short period of time and measure the overall performance as per the tasks. To calculate the
working capital require to follow particular formula such as:
Working Capital = Current Assets – Current liabilities
Through this indicator to know level of liquidity in the business and how much invest
into further activities.
Receivables: It is defined as the balance of money where firm supplier services and
products or utilised but not yet paid by the customers. It is shown in the balance sheet as a
current assets and amount of money collect through customer to buy made on a credit (Carbo‐
Valverde, Rodriguez‐Fernandez and Udell, 2016).
Inventory: It is a accounting term where stocks are available for sales and company use
different types of raw materials to manufacturer of product for sale. The stock level of any
organisation perform the most essential assets because the turn over in inventory.
Payables: It id different from the receivables because it is liability for the organisation
and required to paid amount to creditors in particular period of time. This amount shown in
balance sheet as the current liabilities section.
c. Changes in the working capital
As per the discussed of the working capital is based on the current assets and current
liabilities. The cash is main element in the cash flow that impact on the different organisational
activities. Through cash flow analysis the performance of the business along with cash flow from
2