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(Docs) Business Finance - Assignment

Added on - 23 Nov 2020

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BUSINESSFINANCE
Table of ContentsINTRODUCTION...........................................................................................................................1PART A...........................................................................................................................................1a. What is meant by profit and cash flow and how it is different...............................................1b. What is the meaning of working capital, receivables, inventory and payables......................2c. Changes in working capital affect cash flow...........................................................................32. Apply the concepts for manage affects of financial results....................................................33. Analyse and recommend what steps should now be taken to improve this company's cashflow through better working capital management......................................................................4PART B............................................................................................................................................5a. Elements of financial performance..........................................................................................5b. Calculation of ratio..................................................................................................................6c. Ratios might have change using the information in the scenario............................................72. Analyse and recommend how the board might assess the financial performance of thebusiness.......................................................................................................................................7CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9
INTRODUCTIONBusiness finance means the funds and credit employed in the business. Funds and moneyinvested in business or other business activities are known as business finance. For survivebusiness and conduct business activities required to funds and monetary resources which can beobtained through debt and equity (McLean and Zhao, 2014). Finance is core need of a businessorganisation in order to carry out its day to day activities like purchase of raw material, paymentsalaries and bills and collection of cash from customers. Finance in business key aspects whichensures survival and growth of an business organisation. Finance sources and financial decisionshave direct and indirect impact on organisation's liquidity and profitability position. Theparticular report defines explanations about cash flow and profit and difference between eachother. There are defining meaning of accounts receivable, working capital, payables. There areexamine study on Uber tools Ltd which can own and operate a factory in new market formanufacture power tools. Apart from changes in working capital affect to cash flow in thecontext of company.PART Aa. What is meant by profit and cash flow and how it is differentProfit– It is a financial benefit that is accomplished when the amount of revenueobtained from a business activity exceeds the expenses. Profit is known as surplus which isgained when total income of company more than to total expenses.Cash Flow– It is a flow of cash and cash equivalents which can transfer into and out of abusiness. Cash flow conduct different business activities which can divided into three parts, cashflow from operating activities, cash flow from investing activities and cash flow from financingactivities.Cash FlowProfitThere are money divided into differentactivities which can gain from differentsources.It is the money left over from sales revenueonce costs have been deducted.It is depended on the timing of payment andacquire resources from different sources.Profit is calculated through money which canreceive from different sources.Cash flow represents the corporation strengthIn the profit, sales made beyond a break even1
and help to achieve goal foe ensure aboutsolvency, general positive cash flow &maximizes share price.point.If management of Uber Tools Ltd is capable to manage the cash flow in effective mannerso they are recoded each activities related to cash and control business activities as a advantagethey can not face shortage of cash (Kotz and Podgorski, 2012). If the company have controlbusiness activities and reduce amount of total expenses as compare to total income so it willbeneficial to business for expand in future perspective. The operating profit before interest andtax is £36 Million.b. What is the meaning of working capital, receivables, inventory and payablesWorking capital– It is basically an indicator of the short term financial position of abusiness which can measure and examine overall efficiency. Working capital is calculatedthrough current assets and current liabilities. There is applied a formula -Working Capital = Current Assets – Current LiabilitiesThis ratio point out the company possesses for sufficient assets top cover their short term debt.Accounting Receivables– It is the amount that a business to right to receive after aparticular time period on the time when business has sold goods or services on credit. The termof trade receivables is also used in place of accounts receivables. This amount is owned by thecompany is recorded in general ledger account entitled accounts receivable. It is listed in assetsin side in the balance sheet under the head of current assets. As Uber tools Ltd owned £12millionpounds for a series of large orders placed by D&R last year. These amount used by company fordaily operational activities and try to minimize the credit time period.Inventory– It is the term of goods available for sale and raw material used to producegoods available for sale. Inventory represents one of the most essential part of any organisationand mostly companies are depended on their stocks. The turn over inventory shows it is one ofthe primary sources of revenue generation and subsequent earnings for the company'sshareholders.Accounts Payables – It is presenting as accounting entry that was obligation of companyto pay off a short term debt to their suppliers and creditors. Accounts payables shows in balancesheet under the head of current liabilities. It is related to short term because it is provided bycreditors on short time period.2
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