Business Finance: Cash Budget, Company Features, Corporate Governance, Gearing

Business Finance

TABLE OF CONTENTS
TABLE OF CONTENTS.................................................................................................................2
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Preparing cash budget for Kashi textile......................................................................................3
TASK 2............................................................................................................................................4
Meaning of a company and its features.......................................................................................4
Advantages and disadvantages of forming a public company....................................................5
The crucial importance of cash to a business. Difference between cash and profits earned by a
business.......................................................................................................................................7
Reason for the existence of Corporate Governance....................................................................7
Principles of good governance as described by the Corporate Governance Code......................8
Gearing and its advantages and disadvantages and Interest of banks in companies level of
gearing.........................................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business finance is being referred to as the fund needed by company to manage its
operation and earn profits. Without the use of finance, the company cannot operate in better and
effective manner. The present report is based on case scenario of Kashi textiles wherein the cash
budget will be prepared for the company for next three months based on transaction provided.
Further in another task, the discussion relating to company and its features along with benefit and
drawback of public company will be highlighted. In addition to this the importance of cash and
existence of corporate governance will be outlined. As last the gearing and its advantages and
drawbacks will be evaluated along with the reason why bank is interested in knowing level of
gearing of any company.
TASK 1
Preparing cash budget for Kashi textile
The cash budget is being referred to as the estimation of cash flow relating to the business
for a particular period of time. This is necessary for the reason that when the company prepares a
cash budget then this provides a base to the company that how much estimated cash they can
generate within the company. in case the cash budget will not be prepared by the company then
this will be affecting the working efficiency and operational activity of business to a great extent
(Plaskova and et.al., 2020). the use of cash budget is important for the company because it assist
the company in maintaining financial stability of company. This is because of the reason that it
provides for the net amount of cash which will be left by company after paying off all its
expenses.
Particulars Jan Feb March
Receipts £ £ £
Capital 25000 22362 20430
Sales 4500 6890 5670
TOTAL RECEIPTS 29500 29252 26100
Payments
Computer 1980
Drawings 700 700 700
Purchases (Show working notes) 328 2152 4282
10% same month 328 512 410

50% next month 1640 2560 2050
40% in 2 months’ time 1312 2048 1640
Accountants fees 250 250 250
Delivery charges 100 100 100
Telephone costs 425
Other expenses 250 250 250
Hire charges 250 250 250
TOTAL PAYMENTS 7138 8822 10357
Net Receipts / (Payments) 22362 20430 15743
Balance brought forward 22362 20430 15743
Balance carried forward 22362 20430 15743
With the analysis of the above cash budget it is clear that the company is in position of
earning good amount of profit within the next three months. The reason underlying this fact is
that when the company will be having cash surplus then this will improve the working efficiency
of the company. Also, with the above cash budget it is clear that the total expenses of company
are on increasing trend. Along with this increase, the total cash receipt of company is also
increasing which is good for the company. hence, it can be stated that Kashi textile is going to
improve its cash surplus within the coming next two months. It is good for the performance of
company because in actual when the approximate performance will be made then it will improve
the working of company to a great extent.
TASK 2
Meaning of a company and its features
A company represents a group or association of people formed to do a business. It is a
legal entity. People in a company can be either natural, legal or both. All the members in a
company share common interest and unites in order to achieve their objective (Finck 2018). A
company can be limited or unlimited, private or public, limited by guarantee, having share
capital or community interest company.
Features: