Financial Aspects and Budgeting in Business Finance

BUSINESS FINANCE

Contents
EXECUTIVE SUMMARY.............................................................................................................1
PART A...........................................................................................................................................1
i) Evaluation of financial accounts.........................................................................................1
ii) Concepts used to present the financial aspects to manage the impact of concepts upon
financial results.......................................................................................................................2
iii) Assessment and recommendation subject to effective working capital management......3
PART B............................................................................................................................................4
EXECUTIVE SUMMARY.............................................................................................................4
i) Purpose of making budget...................................................................................................4
ii) Implementation of budgets to forecast cost for significant business.................................6
iii) Traditional or substitute budgetary system.......................................................................7
CONCLUSION................................................................................................................................8
REFERNCES...................................................................................................................................9

EXECUTIVE SUMMARY
The first part of the report execute the financial aspects used in presenting the financial
information of an entity. Key financial elements as profit, cash flow and working capital are
extracted to execute the entities financial position.
PART A
i) Evaluation of financial accounts
a) Profit and cash flow and their difference
Profit: The phrase revenue could be described as an excess of income over spending throughout
a specific time period (Hill, 2016). It is also recognised from net profit as well as the main goal
of all businesses is to obtain higher profitability. Essentially, every corporation occurs for profit
in the whole corporate world.
Cash flow: it is characterized as just a virtual cash or profit ideology from one group for another.
This includes two mainly in-and-flow definitions (Adah, 2016). Cash flow involves certain
operations that generate cash. When money inflow is the activity that is connected to money
outflow.
Difference between profit and cash flow
Profit Cash-flow
The excess income over expenses is recognised
as profit.
It presents the formation of liquidity with
operations.
It contains both the cash and non-cash items
while calculating profitability of organisation.
Transactions which are cash natures are only
considered cash flow.
b) Working capital and meaning of receivable, inventory payables
Working capital: This can be characterized as a type of resources that businesses utilizes
to compensate with daily activities. It is calculated by either a cookie cutter approach that
Receivable: It is characterized as both the transactional accounts and receivable amount
of cash due because of a corporation for the movement of goods or facilities for whom the
amount was not paid by clients.
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Payables: The payables were those through which businesses owe financial support or
goods as just a credit (Hazzan, Lapidot and Ragonis, 2015). Business entities are responsible for
compensation after making a credit transaction and are known as debtors.
Inventory payable: It is also called as stocks and measured by different types of
strategies like last in first out method (LIFO) that means purchase of inventory lastly would be
sold first and first in first out method (FIFO) that states purchase of inventory firstly would be
sold firstly. Weighted average method is used to aggregate the price of inventory. Few type of
inventories are Raw stock, Work in progress (WIP) stock and finished goods stock.
c) The impact of change in cash flow upon working capital management
Working capital also recognized as operating capital (Izurieta, 2015). Variations in operating
capital may have an effect on corporations ' cash fluctuations. Because each fluctuation in
working capital may result to liquidity fluctuations. The cash flow from net cash will reduce if
the yield of total current assets increases. Operating capital is the distinction between current
assets and liabilities. And also if an investment's balance declines, cash flow from operating
would enhance.
ii) Concepts used to present the financial aspects to manage the impact of concepts upon
financial results
Profit: the firm is in quite favourable condition as the firm earned income for Bright
Lawns Ltd was 50,000,000 pounds. Operating income only amounted to 5 million pounds.
Account receivables: Accounts receivable for Bright Lawns Limited are the key
shareholders through those they have taken advance payments for products delivery. As they
received a total of 1.5 million pounds from C&P.
Cash flow: The flow of money among two entities could be described (Simon, 2015). As
for above Bright Lawns Private company, due to the change in existing assets and liabilities, the
profitability can be affected. Unlike the short-term loans, they are rising although the clients
obtain payment in advance.
Accounts payable: The debts of company stated as £18 million from £16 million the year
before. This will impact upon the capital adequacy of company. This includes certain
organizations that are responsible to pay payments to every income as a result of previous credit
purchases (Park and Jang, 2013). To the above-mentioned Bright Lawns Limited company, those
who buy their goods on loans and ensure to pay that back may be their record receivable.
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