Business Finance: Working Capital and Budgeting

BUSINESS FINANCE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
Brief explanation of the concepts. ..............................................................................................1
Effect of management on financial results of company. .............................................................3
Steps for improving cash flows via working capital....................................................................3
PART 2............................................................................................................................................4
Objective of preparing budgets & traditional budgeting.............................................................4
Alternative methods of budgeting ...............................................................................................5
Application of above budgeting methods to plan for cost management. ....................................6
Analysis of traditional and other alternative budgeting approaches............................................7
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business finance could be defines as monetary funds and credits employed the the
business finance. For any business finance is the basic requirement without which business
cannot run successfully. Finance is required for each and every activity carried out by business.
For purchasing goods, assets, raw materials and like other activities. It could also be referred as
provision of money that is required on need by business. Present report is based on the
Mediterranean Delights Ltd operating 30 delicatessens around South England. Company supplies
large chain of restaurants with the range of imported goods. The company is concerned with the
working capital management. Second part of the report is based on Second Sight plc producing
prescription glasses and sunglasses for various international brands. This is concerned with
importance of budgeting and budgeting techniques. Report will enhance the understanding about
the working capital and budgeting for business.
PART 1
Brief explanation of the concepts.
a) Profit and cash flow
Profit refers to the return that company generates on carrying the business. This is
defined as revenue minus expenses. This refers to the amount that is left with the company after
meeting all its business expenses.
Cash flow refers to flow of money in and out of business. Cash flows is concerned with
money flowing in and out of business related with different activities. Cash flow is reported in
cash flow statement of company. It consists of operating, investing and financing activities.
There is a difference between profits and cash flows. Cash is not increased with the increase in
profits and also is not decreased with decrease in profits.
Cash flows and profits are separate parameters, that have equal importance in the
business. Profits are important for the growth and success of business. This shows that business
is doing well and left with enough funds for carrying out the other activities. Profits is a
measurement of growth and efficiency of management in running the business. On the other cash
flow is the blood that keeps the business alive. Even if business is profitable, it could not run its
operation without having the cash. Management is concentrated over ensuring that the healthy
cash fows are there for running the business.
b) Working capital, inventory, payables and receivables.
1