Diverse Cash Management Methods : Report
Added on 2020-06-04
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Business finance Contents
PART 1............................................................................................................................................1Executive Summary.........................................................................................................................11. Explanation:........................................................................................................................12. Application:........................................................................................................................33 Analysis:..............................................................................................................................3PART 2............................................................................................................................................5Executive summary..........................................................................................................................51. Explain:...............................................................................................................................5b). Investment appraisal methods:..........................................................................................62. Application:........................................................................................................................73. Analysis:.............................................................................................................................8Conclusion.......................................................................................................................................8
PART 1Executive SummaryIn every business, there is a strong requirement to employ cash for earnings maximumrevenue or profits for the organisation. By opting of considering diverse financial managementtools, organisation can attain diverse strategies for gaining money related aspects. According tothis report, diverse cash management methods are implemented for forming their operations inan efficient manner. Cash management is attained by rendering working capital and profits couldbe optimised by implementing efficient cash management in the firm. Diverse effects on lack offinance are likewise elaborated in this report.1. Explanation:a)Profits and cash flow management: Profits is the ultimate goal on which everycompany is striving hard. Although, this can be said that the profits of the organisationtotally related to the risk. This is said that more risk stimulates in order to earn moreprofits, which can help the organisation for making the business targets achievable withinthe time frame. Organisation likewise required to think in order to maximise profits alongwith other components so that organisation could maximise profits in a short run (Engel,Fischer and Galetovic, 2013). There are most specific tools that are used which requiresto adopt during running of operations effectively. Henceforth, Root and Cook Ltd (RCL)is striving hard for running their operations in an effective manner.b)How profits and cash flow are different: Cash flow and profits are the major source inthe financial tools. As, these are different to each other. Because, cash flow comprisescash inflows and outflows while profits may be in cash or credit basis. Cash flow is theamount which manager needs to meet out the current and future obligation. In theprovided case, RCL company earned £18 million profit while on the other hand, this canbe said that the company is striving hard for maximising the profits effectively so thatthey could repay their debts in an effective manner. Cash flow is an amount whichultimately which have inflows and outflows from the organisation from diversemanagerial operational activities. This is the amount that managers or owners needs tomeet existing and future responsibilities. Cash is like air during profits is such as likefood. Although, organisation is operated for earning profits as this helps to develop it in1
an effective manner. This is the amount which managers or owners needs to meetexisting and future responsibility. Cash is just like an air while profits is like food.Without profits, organisation could carry out for earning profits as this helps todevelopment. If organisation does not earn profits, then in that case, company wouldforesee its actual investment diminishing and new investors will stay away. If firm islucky, then buyout will happen, which leads to form firm disappear. If the organisation has cash crunches then in that case, it can’t satiate its business needed.There are specific tools which could be implemented for forming business strategies thatcan assist for forming efficient strategies. There is a strong requirement to form theirbusiness operation.As per the provided condition, organisation is addressing cash crunches andentrepreneur motivating their shareholders to deploy more cash so that this can help outthe firm for forming efficient strategies. As per the provided situation, organisation is facing cash crunches and its ownersmotivating their shareholders to deploy higher cash henceforth, the debt payment isformed and such cash crunches could be avoided (Engel, Fischer and Galetovic, 2013).By applying these techniques, organisation can form specific strategies henceforthGarden Rite Ltd could have the sustainable advantages. b). Working capital: Basically, there are two kinds of working capital which are mentionedhereunder:Gross working Capital: Under this, capital is dispersed under the total assets of theorganisation. There are various cash in hand and bank balance, bills receivable, prepaidexpansion and much more.Net working capital: It is the capital which surpasses current assets over currentliabilities. For instance, Current liabilities are the bills payable, bank overdraft, provisionfor taxation, sundry debtors etc. Net-working is an accounting idea of working capital.This is the capital which is required to run functioning activities of the organisation. Workingcapital is assuming to be the life blood of the organisation. Henceforth, this is the highlyimperative to run the operations in an effective manner. this is highly crucial benefits ofmanaging satisfactory amount of working capital which are explained hereunder:2
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