Business Finance

This report discusses cash budget formulation for three months, accounting equation and its balancing, benefits of shares listed on stock exchange, stakeholders in Marks and Spencer, and difference between profit and cash flow. It also highlights the importance of having appropriate business finance for better decision-making.

Business Finance

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Formulation of cash budget or the three months ending 31 March 2022...................................1
TASK 2............................................................................................................................................3
2.1 Explaining the accounting equation and reason for its balancing.........................................3
2.2 Explaining the benefits company obtains by having shares listed on stock exchange.........4
2.3 Describing stakeholders in large company In Marks and Spencer.......................................5
2.4 Different between profit and cash flow justification of whether profit is reliable indicator
of cash balances...........................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business finance is related with obtaining the information regarding monetary resources
of organization through analyzing and monetary resources in turn proper decision can be taken.
In the recent era, there is need of having appropriate business finance in turn greater
effectiveness can be derived. The current report is based on formulation of cash budget so that
proper evaluation can be done. Present report will evaluate accounting equation and reason for
its balancing. The study will give emphasize benefits of shares listed on stock exchange for
providing depth insights. It will include different kinds of shareholders of a large company like
Marks & Spencer. The current study will highlight how reliable indicator of cash balance along
with showing difference between profit & cash.
TASK 1
Formulation of cash budget or the three months ending 31 March 2022
Particulars January February March
Cash inflows
Opening cash inflow 10000 6556 6481
Sales revenue 840 2410 1575
Total cash inflows 10840 8966 8056
Cash outflows
Purchase 2800 1500 1750
Electricity bill 285
Telephone cost 120 120 120
Fuel cost 65 65 65
Withdrawal 800 800 800
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Purchase of computer for personal
use 499
Purchased a computer for business
purposes 720
Purchase of motor van 3200
Total cash outflows 4284 2485 6220
Cash deficit / surplus or closing
cash balance 6556 6481 1836
Balance bought forward 10000 6556 6481
balance carried forward 6556 6481 1836
On the basis of the reflected cash budget it can be specified that there are number of benefit of
applying the cash budget technique in organization. The one of the significant factor which is
achieved by company by formulating cash budget is gaining insights of available cash budget in
turn higher ability to make strategic decision can become possible. In addition to this, it can be
specified that there are few competitive advantages which can be achieved by firm through
executing relevant course of action in turn higher productiveness (Cardwell Williams and Pyle,
2017). It is formulating the ideal structure in which cash expenses are deducted from the income
so that proper evaluation of remaining balance at the end of moth can be derived.
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From the evaluation of the cash budget it can be articulated that there are significant
expenses incurred by the company for carrying forward its operational activities. The present
prepared budget for the shown months it can be specified that the h prevailing trend is
downward falling (Donelan and Liu, Y., 202). It is basically reflecting poor performance for the
particular quarter. The main reason behind this outcome can be identified that incurred cost for
each period is increasing and the source of income shown in providing less cash. It is presenting
that company does not have effective performance in order to gain competitiveness which might
not allow the particular enterprise to have stability.
There are number of reasons for which company formulated the budget cash budget in
turn higher profitability and sustainability can be derived. The one of the significant reason for
highlighted kind of budgetary is formulated in turn higher productiveness can be achieved by
focusing on having ability to identification crucial aspects. This provides capabilities to avoid
the debt by identifying unforeseen circumstance in significant pattern. There are larger number
of advantages but optimum utilization of resources with having this can lead incline accuracy
and fairness. Taking strategic decision highly becomes possible by availing accurate & reliable
information regarding the financial health of the company.
On the basis of this it can be interpreted that derived outcome is helpful in having
appropriate information to raise funds in respect to coordinate with changing situations. The
particular organization should focus on having higher competitiveness to deal with prevailing
challenges by declining the cost and increasing income sources (Marques and et.al., 2019). In
addition to this, it can be stated that obtaining relevant strategy for establishing coordination can
be effectually exerted by enterprise through implementing it. It should focus on declining
expenses to certain extent to incline the cash balance at the end of month for enhancing its
financial ability to meet obligations.
TASK 2
2.1 Explaining the accounting equation and reason for its balancing
The financial statement is formulated by following the accounting equation in which
there are two side assets and liabilities. The balance sheet prepared by companies has main
objective of presenting significant insights of summary data which can lead to increase ability to
take strategy accordingly (Alarussi and Alhaderi, 2018). The assets involve cash, inventory, van,
machinery, property, goodwill, etc. These help in presenting the capacity of enterprise to
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optimize the resources and obligation overcoming situation. Accounting equation is concerned
with liabilities plus equities equal to assets. Balance sheet is related with having balance at both
the side such as assets ans liabilities in turn material information can be provided.
Balance sheet is based on the double entry system which is related with recording the
commercial transaction in two accounts. In addition to this, it can be specified that financial
sheet is based on double entry system which allows to equalize the balance. For instance- assets
purchased worth of 324 by paying cash. On the basis of this, it can be specified that company
has recorded in both the mentioned accounts. The balance amount can be understood that firm
has liabilities of $259 and $65 equities. From the evaluation it can articulate that both the side of
assets and liabilities plus equity are equal.
2.2 Explaining the benefits company obtains by having shares listed on stock exchange
There are number of benefits which can be achieved by the enterprise through being
listed on the stock exchange. The main reason for which enterprise lists itself on the stock
market is to being able to achieve distinct competitiveness. It can be specified that there are
crucial merits which comprise higher profitability, sustainability, raising fund from diverse
sources, etc.
Boosted profile
The one of the crucial benefit which can be attained by company being listed on the stock
exchange is availing capabilities to boost its profile (Agustia, Sawarjuwono and Dianawati,
2019). The main reason behind this is to have more visible and recognizable when compared to
other privately held counterparts.
Access to capital
It is an essential requirement of any business sis to raise capital in turn ability to meet
predetermined objective can become possible. Raising capital from the divers range of technique
to gain suitable cost of capital in turn better objective accomplishing can become possible.
Transparency & efficiency
These are considered to be crucial for the company's growth and development as allows
conducting operational practices in efficient pattern. Listed company is required to present the
financial information to stakeholders in accurate and transparent manner. It increases
trustworthiness so that dealing becomes easy.
Enhanced visibility
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listing on the stock exchange aids company to increase h credibility and viability among
institution and investing public (Lindsten, Auvinen and Juuti, 2019). It provides assistance in
avoiding non crucial legal complications by increasing visibility and transparency in its
operational activities.
Increased exposure and accountability
Being listed on stock exchange is helpful for the enterprise to conduct its business
activities and advertising crucial investment journal, financial, magazines and news stories. The
company is held itself responsible for any non ethical practices as there are many rules and
regulations are imposed by company.
There are several other advantages as well that can be achieved by companies through listing its
hares on stock exchange. The one of the significant ability which is derived by the company is to
have trustworthiness and credibility in the sector which inclines its eligibility to raise funds from
the distinct sources (Radzi and et.al., 2018). To accomplish the obtained objectives firm need
efficient ability to accomplish the requirements in turn strategic management can be done. There
are collateral values of practice which has better compliance with corporate rules and
regulations. Timely disclosure of corporate information and fair prices for the securities of
supervision & controlling of trading in securities. Ready of marketability of securities in turn he
fair prices of securities can be achieved. On the basis of this, it can be articulated that these are
the benefits which can lead to increase profitability and stability in industry.
2.3 Describing stakeholders in large company In Marks and Spencer
Larger company like Marks and Spencer (M&S) operates in international market which
has both internal and external stakeholders. Each type of stakeholders in sector play significant
role in affecting the growth and development of enterprise.
Internal stakeholders
The stakeholders who have are connected and responsible for managing and controlling
operational activities. The internal stakeholders are employees, management and owners. There
are several kinds of activities which are executed by internal stakeholders in turn higher
profitability & stability can be derived. Management of the enterprise is responsible for
assigning and delegating job and authority for meeting the overall accomplishing objectives can
become possible (Internal, External, vs Shareholders. 2021). The employees of M&S a re
recruited from the department parts which formulated divers workforce and enable the enterprise
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to have maximum capabilities to meet organizational objectives. In addition to this, it can be
said that having mentioned that internal stakeholders of M&S are highly responsible for
optimizing resources, stratifying customers, etc in turn leading position in sector ca be derived.
External stakeholders
There are various external stakeholders of the M&S which are required to be taken into
consideration as has impact on the proceeding of company. The external stakeholders involve
investors, competitors, financial institutions, lenders, suppliers, creditors, local community,
government, etc. Each stakeholder has different role and has significant power which impact the
proceeding of enterprise. Investors of Marks and Spencer highly get affected from the
operational efficiency and profitability of firm. M&S's investors provide fund to the company
for carrying forward its operational activities in turn better return can be given to them.
Competitors of the organization as well play crucial role in affecting the processing of enterprise
as pay attention on gaining leading position in respect to have stability and profitability. M&S
as being international organization as larger number of competitors which are required to be
emphasized by focused for obtaining leading position in sector. Suppliers and lenders are those
external stakeholders that has impact on meeting market capabilities of enterprise. In addition to
this, meeting forces of company can be done by company effectively through having suppliers.
(Hart and Zingales, 2017) The main reason behind having suppliers as these permits to get the
ability to accomplish objective of providing relevant products to customers. Buyers are as well
crucial stakeholder which need to be emphasized as ultimate objective of meeting market forces,
higher share, increased revenue. Higher profit margin, etc. In addition to this, meeting Gehrig
level of customers satisfaction becomes important as allows to have efficient processing.
To gain success it is important for the firm to look into the prevailing issues of company
which are arising due to non-compliance with government rules and regulations. It is highly
required to focus on having appropriate adherence with imposed legislation, laws and rule sin
turn higher chances of attaining stability inclines. In addition to this, it can be specified that
these are external stakeholder which are needed to be focused by Marks & Spencer in turn
higher profitability can be derived.
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2.4 Different between profit and cash flow justification of whether profit is reliable indicator of
cash balances
There are some major differences between the cash flow and profit is that profit indicates
the amount of money that is left over after all the expenses are deducted (Budiputra, 2021).
However, the cash flow in the indication of the net flow of cash which is collected by the
business. The investors and business owners are often in search of a single metric which helps
the organization in understanding the health of the company. The cash flow can be said to be the
flow of money which takes place either in or out of the business for a given period but the profit
is the remains which are left from the revenue after all the costs are deducted.
The profit is considered to show the immediate success of the business the cash flow in
know to be sharper means for the determination of the company's long term financial outlook.
The differences of the cash flow and profit shows that a business can be profitable even while
having poor cash flow (Hastuti, Arfan and Diantimala, 2018). This happens because the cash
flow does not record the transactions which are made on credit. Certain organization with poor
cash flow end up facing issues which despite the reaching profitability in the business are unable
to meet the financial obligation. The profit and cash flow are considered to be very important in
their own ways which effects decision-making of the business owner, employees, investor and
entrepreneur. They are known to be very helpful for the business as understanding both the
metrics is said to be very helpful for the business to evaluate the financial health of the business.
For understanding which is more important for the business when it comes to the debate
between profit and cash flow. Once the debt is said to be paid or the cash is considered to be the
paid or the business sees the influx in the revenue it keeps the business running while still being
in profit. In this organization a business can increase the revenue and cash flow which is
considered to be the substantial amount of debt that allows the business to make profit. It is said
that the absence of the profit eventual results in the decline of effects of the cash flow (What is
Profit vs Cash?, 2021). Thus, it can be said that profit is much more important for a business
than cash flow. It is also said that it depends on the size of the business which determines which
is more important profit or cash-flow. For a business in which the owner has invested its
personal assets as capital into the business. Then for such business the cash flow is more
essential as it helps the owner in recovering the invested amount.
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CONCLUSION
From the above report it can be concluded that business finance is crucial for giving
insights needed for making strategic decision. The present working environment has become
complex which needs to be dealt with having effective planning & controlling of business
finance. The current report has comprised cash budget which is reflecting declining trend. The
current report has given emphasis on providing reason for balancing financial position which is
double entry book keeping system and accounting equation. There are number of benefits which
can be attained by listed by organization which involves raising fund, higher transparency &
visibility, etc. In addition to this, current report has comprised stakeholders of M&S which
involves internal & external such as employees, government, etc. the present study has involved
difference between profit and cash flows so that significant indicator of growth can be derived.
REFERENCES
Books and Journals
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management accounting on green innovation-Firm value relationship. International
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Alarussi, A.S. and Alhaderi, S.M., 2018. Factors affecting profitability in Malaysia. Journal of
Economic Studies.
Budiputra, F.R., 2021. The effect of using profitability, liquidity and cash flow in predicting
financial distress on transportation companies listed in Indonesia Stock Exchange
(Doctoral dissertation, Universitas Pelita Harapan).
Cardwell, L.A., Williams, S. and Pyle, A., 2017. Corporate public relations dynamics: Internal
vs. external stakeholders and the role of the practitioner. Public Relations Review. 43(1).
pp.152-162.
Donelan, J.G. and Liu, Y., 2021. Using the Accounting Equation for Preparing the Statement of
Cash Flows. In Advances in Accounting Education: Teaching and Curriculum
Innovations. Emerald Publishing Limited.
Hart, O. and Zingales, L., 2017. Companies should maximize shareholder welfare not market
value. ECGI-Finance Working Paper, (521).
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Operating Cash Flow on Earnings Management at Manufacturing Firms Listed in the
Indonesian Stock Exchange. International Journal of Academic Research in Business &
Social Sciences. 8(9). pp.1133-1146.
Lindsten, H.H., Auvinen, P.J. and Juuti, T.S., 2019. INTERNAL AND EXTERNAL
STAKEHOLDERS’IMPACT ON PRODUCT DEVELOPMENT CURRICULUM
DESIGN. In DS 95: Proceedings of the 21st International Conference on Engineering and
Product Design Education (E&PDE 2019), University of Strathclyde, Glasgow. 12th-13th
September 2019.
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Marques, P. and et.al., 2019. Corporate social responsibility in a local subsidiary: internal and
external stakeholders’ power. EuroMed Journal of Business.
Radzi, N.A.M. and et.al., 2018. What drives them to do CSR? Another empirical study of CSR
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Online
Internal, External, vs Shareholders. 2021. [Online]. Available through:
<https://boycewire.com/stakeholder-definition//>.
What is Profit vs Cash?, 2021.[Online]. Available through:
<https://corporatefinanceinstitute.com/resources/knowledge/finance/profit-vs-cash/>
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