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BUSINESS FINANCE TABLE OF CONTENTS INTRODUCTION 1 PART 11

   

Added on  2020-12-23

11 Pages3153 Words176 Views
BUSINESS FINANCE

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1PART 1............................................................................................................................................11.a Profit and cash flow ..............................................................................................................1b. Working Capital and meaning of receivables, Inventory and payables ................................2c. Changes in working capital affect Cash flow .........................................................................22. Application of concept to UberTools Ltd..............................................................................33. Analysis and recommendation to improve cash flow through better working capitalmanagement ...............................................................................................................................3PART 2............................................................................................................................................41. a Elements of financial performance .....................................................................................4b. Calculation of ratios ...............................................................................................................5c. Application of the result .........................................................................................................52. Analysis and recommendation ...............................................................................................6CONCLUSION ..............................................................................................................................7REFERENCES................................................................................................................................8

INTRODUCTIONBusiness finance is related to the funds which are required by the organisation of fundtheir operations. With the help of finance the firm is able to source and utilize the fundseffectively and efficiently. In this study UberTools Ltd will be consider that own the factory inthe new market of producing power tools. In this assignment the difference between profit cashflow will be provided. It will also include the meaning of working capital. Also, It will provideunderstanding about the effect on cash flow due to changes in working capital. PART 11.a Profit and cash flow Profit is the revenue which is being generated b y the business by performing variousbusiness operations. It is identified by preparing the income statement which consist of theincome and experiences for the period. It is necessary for the firm to acquire profit for the futuregrowth and success of organisation. The profit is earned by company by providing its productsand services in the market (Burns and Dewhurst, 2016). It is identified by meeting the expensesincurred less revenue generates which provided with the profit earned during the period.Business success and failure is measured by the profit generate by the firm if the firm hasincrease the profitability over the years that means it if growing and if the profits are fluctuatingof decreasing over the years the firm is leading towards failure of business. Whereas Cash flowinclude the cash inflow and outflow for the period. It is used to identify the cash requirement ofthe business (Kraemer-Eis, Lang and Gvetadze, 2015). The cash flow during the period isdetermined on the basis of the cash flow statement which include the cash inflow and outflowfor the period on the basis of operating, investing and financing activities. Difference between cash flow and profit Profit Cash flowIt is a revenue generated by business byperforming its operations It is the cash inflow and outflow for the period It is based on accrual conceptIt is based on cash accounting concept.The profit is identified by preparing the incomestatementIt is identified through the cash flow statement1

b. Working Capital and meaning of receivables, Inventory and payables Working capital is the amount of capital which is required in the firm to perform its dayto day operations. It is defined as current assets less current liabilities. It is the money availablewith the firm for performing its business activities with the help of working capital the businessis able to measure its liquidity position , efficiency and the performance of the firm. Workingcapital include the cash, inventory, account receivables etc (Jordà, Schularick, and Taylor,2016). The working capital assist in growth and success of the business which help the firm inincreasing the performance and its profitability by utilizing the working capital in the effectiveway to generate revenue. It include the followings :Receivables : It is the amount which will be received by the company from its customersthat has purchases good on credit. The receivable shows the amount which is beingunpaid by the customers and will be received at the future pint of time. The unpaidbalance amount is show ion the current assets of the balance sheet. It represent the line ofcredit which is extended by the company. Inventory : It is the accounting term that refers to the goods which are in the differentstages for being ready to sale. It is the goods which are being used by organisation forproviding to the customers in the future. It is the largest current assets of the firm(Kraemer-Eis and et.al., 2018). The inventory include raw materials, work in progressand the finished goods.Payables : It is the amount which is not paid by the company to its creditors forpurchasing goods from the suppliers on credit. It is shown on the current liability of thebalance because it is the best for the company which is required to be paid in the futurepint of time. It is the obligation for the company to pay the current liabilities such aspayables. It assist in understanding the liquidity position of the firm.c. Changes in working capital affect Cash flow Working capital is the amount which is required by the business for performing its day today operation which help in the growth and success of the business. The changes in workingcapital is caused due to increase or decrease in the current assets and liability of the firm. Thechanges in working capital may leads to positive or negative working capital which is reflectedin the cash flow statement (Maxwell, 2017). Positive working capital is when the firm has more2

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