Business Finance

Business Finance

Table of Contents
PART 1............................................................................................................................................3
EXECUTIVE SUMMARY ............................................................................................................3
MAIN BODY...................................................................................................................................3
1. Explain the following terms.....................................................................................................3
2. Apply the above concept and show that how company managed which further affect the
financial results............................................................................................................................4
3. Recommend some steps which helps in improving the cash flow of the company for better
working capital management.......................................................................................................5
CONCLUSION................................................................................................................................6
PART 2............................................................................................................................................6
EXECUTIVE SUMMARY ............................................................................................................6
MAIN BODY .................................................................................................................................6
1. Purpose of preparing budget and explain the traditional as well as alternative budgets.........6
2. Demonstrate the application of budgets which used to plan future cost management for the
business........................................................................................................................................8
3. Analyse that whether traditional or alternative budgetary method appropriate for business. .9
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................11

PART 1
EXECUTIVE SUMMARY
This report based on the accounting concepts such as profit, cash flow, working capital,
inventory etc. How organization able to managed these changes which further affect the financial
results of the company. In order to cover this content, this project report based on Bright lawns
Ltd (BLL). Along with this, recommend some steps to improve the cash flow with the help of
working capital management.
MAIN BODY
1. Explain the following terms
(a). Difference between profit or cash flow:
Profit: This term define as financial benefit which generated with the help of performing
operational activities of the business (Pettit and Singer, 2014). In the organization, profit will be
measured on three major basis such as gross profit, operational profit and net profit which is the
final one. It further help the manager to evaluate actual performance of the business with the help
of analysing overall revenue of the company.
Cash flow: It is the movement of cash in terms of in or out from the business which
affect the liquidity of the company and it further affect the production. All the business related
activities recorded in the cash flow statements such as income, expenses, payment of mortgage
interest, any investments, borrowings etc.
Basis Profit Cash Flow
Meaning It is the financial gain which
organization get from business
activity. Profit is the value which
remains after deducting all the cost of
business operations.
Inflow or outflow of cash represented
the operational activity. Different
between inflow or outflow of cash
represent the liquidity of the company.
Measure It is used to measure the success of
business in terms of profit.
It is used to measure the flow of cash in
the organization in terms of inflow or
outflow.

Formula Profit = Total revenue – cost of good
sold
Cash flow = Cash inflow – cash outflow
(b). Explain the following term:
Working capital: It is the term which used in the organization in order to fulfil their day
to day requirement of fund (Atrill, McLaney and Harvey, 2014). Difference of current assets or
current liability known as working capital which required by every organization.
Formula: Working capital = Current assets – Current liability
Receivable: In this process, company will receive payment from its customers who
purchase goods & services on credit. In context of business, it is the amount which owned by the
customers but not yet paid by the clients.
Inventory: It is the stock of the company which consider to be finished goods but
inventory also describe that raw material which used to produce final goods. Basically there are
three time of inventory which used by the organizations such as raw material, work in progress
and finished goods.
Payable: It is the amount which owned by business from its suppliers and it will be
mentioned in the liability side as account payable. It is the obligation which organization have to
pay as soon as possible.
(c). How change in working capital affect the cash flow:
Working capital change because of various reasons, so organization have to make sure
and try to minimise the impact on cash flow. In context of business, if debtors not pay the
amount then it will increase the balance of currents assets (Aktas, Croci and Petmezas, 2015). On
the other hand, there are various items which required to write off and it further affect the cash
flow of the company.
If balance of assets side decreases because of then cash flow from operating activity also
decreases because. On the other side, when balance increases then it also affect the cash flow
operating activity. Any kind of changes in the working capital line will directly affect the cash
flow of the company.