Report on RCL management - doc

Added on - 06 Jun 2020

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Business Finance
Table of ContentsExecutive Summary.........................................................................................................................3PART 1............................................................................................................................................31. Explain................................................................................................................................32. Application:........................................................................................................................53 Analysis:..............................................................................................................................6PART 2............................................................................................................................................71. Explain:...............................................................................................................................72 Application..........................................................................................................................93 Analysis.............................................................................................................................11CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12
Executive SummaryBusiness finance is the most effective tool which are used by a firm for sustainabledevelopment. Although, by implementing finance, RCL can make sustainable development.Although, this can be said that theProfits are the main aspect which arise after having operationsin an effective manner. Although, this can be said that the profits is also known as net income,which comes from sales revenue after entire firm's expenses are deducted.PART 11. ExplainA). Profits and Cashflow and how they are different:This is clear that the principle which a firm can't survive until it is profitable. Oftenlly,due to the cash flow, strong success of goods which have been produced profits. On the otherhand, this is quietly said that the company can raise profits after reducing production costs, andthis is possible after having a detailed analysis of the entire expenses (Bakand, Hayes andDechsakulthorn, 2012).Cash flow is the real money which ultimately flows in and out form the operation relatedactivities, financing and investing related activities. This is the amount which requires to meetout current and short term responsibility.But there are two main aspects to keep in mind about cash flows:1.Business could be profitable and still not have appropriate cash-flow. In worst case,inappropriate cash-flow during a profitable company could send it into bankruptcy. Forinstance, there is a forming widgets and selling them during at a profits. But there is aneed to have product which goes via long sales chain and few of the large clients don'tpay on the invoice for 120 days. Which in turn, enhance the cash inflows in an efficientmanner. If the company is unbale to meet out its financial obligations, in this situation,company creditors would force to shut the business down via Bankruptcy.2.Sales might be emerging and amount keeps pouring in, but that doesn't mean thatcompany is making a profits. If the company is borrowing money for solving the cash-flow related issues. For example, rising debt costs emerge costs above break-even point.If so, cash inflow would finish and business would fail.3
Profits and cash flows are different to each other. As cash-flows consist inflows andoutflows which ultimately reflects the cash surplus and deficiency of the firm. While on the otherhand, profits is the main outcome which arise after subtracting all the operation, financing andinvesting related expenses from the sales and other earnings of the business. In this case, this canbe said that the company is using their business operations in order to gain profits but wholeprofits earned by the company would not reflects cash-flows. There are few amount which inturn out to be on credit basis.Under this case, Root & Cook Ltd having operating profits before interest andtaxes which was£18 million that shows company is having profits in an effective manner.B).Working Capital is the calculation of organisation's efficiency and its short-term financialviability. This is calculated as:Working capital: Current Assets- Current liablities.Working capital ratio (Current Assets/Current Liabilities) mentioning whether anorganisation has an efficient short term assets in order to cover its short term debt. The currentratio less than reflects a negative W/C. While on the other hand, anything over 2 reflects that anorganisation is not investing excess assets (Bartram, Brown and Waller, 2016).If organisation's current assets does not exceeds its current liabilities. Henceforth, thismight run into bothering paying back creditors in short term. Worst-case situation is thebankruptcy. A reducing working capital ratio over a higher period of time which can likewise bea red flag which warrants higher analysis. For instance, this can be said organisation's salesvolumes are reducing and, as an emerging, its accounts receivables numbers consistently to havetiny. Working capital likewise renders investors an idea of the organisation's underlyingoperational efficiency.Receivables are those who have ultimate responsibility to pay off to the company whomthey have taken any goods on a credit basis. They are the debtors of the company whichultimately affect the business in an effective manner. On the other hand, this can be said that theAccount receivables are the legally enforceable claim for payment held by the business for goodssupplied and/or services rendered that consumers have ordered but not paid for.4
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