Business Finance: Components, Cash Flow, Working Capital, Budgeting

Business
Finance

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
Explanation of different components...........................................................................................1
Application of concepts...............................................................................................................3
Analysis and recommendation about the steps which should be taken to improve company's
cash flow through working capital management.........................................................................3
PART 2............................................................................................................................................4
Understanding of purposes of preparing a budget and explanation of tradition and alternative
budgetary systems........................................................................................................................4
Demonstration of the application of the methods to show their use in planning future cost
management.................................................................................................................................6
Analysis of whether traditional or alternative budgetary system is appropriate to all or any
parts of the business.....................................................................................................................6
CONCLUSION................................................................................................................................7
REFERNCES...................................................................................................................................8

INTRODUCTION
Business finance can be defined as the money which is used by organisations for the
purpose of running all the operational activities. If there is lack of it then it may affect the
efficiency of carrying out operations (Burns and Dewhurst, 2016). This assignment is divided in
two parts, first one is based upon Bright Lawns Ltd. which is operating its business in London,
Birmingham and Manchester. Second one is based on Boat World Plc which is an international
leisure company that rents boats to the holiday makers and operates in France and United
Kingdom. This project covers various topics such as profit, cash flow and their differences,
working capital, receivables, inventory, payables and the way in which working capital changes
affect cash flow. Along with this, application of concepts, steps to be taken to improve cash
slow, purpose of preparing budget, different methods for their preparation and application and
discussion regarding appropriateness of traditional and alternative budgetary system are also
covered in this report.
PART 1
Explanation of different components
Profit: It can be defined as financial gain which is generated by an organisation by
selling its products and services to clients. While calculating it the accounting professionals are
required to deduct costs from the amount which is received from selling activities. All the
incomes which are generated by an organisation after deduction the expenses is known as profit.
It is mainly analysed by shareholders for the purpose of measuring success and ability of a
company to generate profits.
Cash flow: It is the total of monetary resources which are transferred in and out of a
business for the purpose of facilitating the process of carrying out operational activities. In other
words, it can be defined as the procedure in which money flows inward and outward of a
company. It is the total amount of cash and other cash equivalents that are available to an
enterprise (Canales, 2016).
Difference between profit and cash flow: There are various differences between cash
flow and profits. All of them are described below:
Cash flow Profit
1