Relevance of Finance in Business | Desklib

Business Finance

EXECUTIVE SUMMARY
This report present the relevance of finance in a business. The report is divided into two
parts under two scenarios. The part one states about the important financial terms such as
working capital, receivable, payables and cash flow. The importance of working capital
management and cash flow to the business. The second part talks about the different budgetary
methods and the evaluation of the best method for the organization. Based on the findings, the
alternative methods are best for organization to plan its future goals and objectives.

Table of Contents
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
a. Meaning of cash flow and the profits with the difference between both ...............................3
b. Explaining meaning of the working capital along with receivables, payables and an
inventory ....................................................................................................................................4
c. Explaining the ways in which the changes in the working capital might affect or impacts the
cash flow ....................................................................................................................................5
How company is managed might affect its financial results.......................................................5
Steps that should be taken to improve the organisation cash flow through working capital
management................................................................................................................................5
PART 2............................................................................................................................................6
Purpose of preparing budgets along with strength and weaknesses...........................................6
Application of different methods to plan future cost management.............................................8
Analysing the appropriate method of budgeting system.............................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business finance means the credit and the money that is been employed within the
business. Finance is stated as the basic need for running the business smoothly. It is needed for
purchasing an assets, raw material, goods and the other flow of an economic activities (Connolly
and Jackman, 2017). In other words it could be defined as provision of the money at time when
it is required by an enterprise. The present study is based on Mediterranean Delights which is
produces 30 delicatessens for an entire South of England. Furthermore, the study presents deeper
insights towards the meaning of the profit and the cash flow in addition to the effect of changes
in the working capital. Moreover, it also highlights the objective behind framing of budget with
describing traditional and modern approaches of budgeting.
PART 1
I.
a. Meaning of cash flow and the profits with the difference between both
Cash flow- It is referred as the net amount of the cash that an enterprise disburses and
receives during a time period (Canales, 2016). Positive value of the cash flow needs to be
maintained for the company in order to remain within the business and it is also required for
creating value for the stakeholders.
Profit- It means the financial gain that is left after deducting the cost from the
revenue generated. In other words, it seems as the financial benefit that is been realized
when the revenue resulted from business operations exceeds an expense, taxes and the cost
included in sustaining an activity. Moreover, company could gain profits constantly but
can be short of the cash resources. For example- depreciation is a non-cash expense that
results to reduce profits.
Cash flow Profit
It refers to the cash inflows and the outflows
for the specific business.
It is revealed as subtracting expenses from the
revenue.
Cash flow is represented as the money
collected for various sources.
It reflects the money that is left over from the
sales revenue once the cost has been reduced.
It is been impacted by timing of the payments Profit is computed prior to the receiving of