Business Finance Report for Company BOD

This report discusses various aspects of business finance, including cash flow and profit, working capital, steps to improve cash flow, and cash budget for Bemus Ltd. It includes a report to the Board of Directors of Victory Plc. and an analysis of the cash budget of David Bemus. The report provides recommendations for improving liquidity and profitability of the business concern.

Business Finance
Report for company
BOD

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Part A:..............................................................................................................................................3
Report to Board of Director: -.....................................................................................................3
1. Explain the difference between Cash flow and profit.............................................................3
2. Explain working capital and also explain the effect of change in working capital.................4
3. State the steps to improve the cash flow of Victory Plc..........................................................4
PART B.......................................................................................................................................5
1. Prepare the Cash Budget for Bemus Ltd. for 4 consecutive months from March 2022..........5
2. Prepare an analyse report of cash budget of David Bemus.....................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Finance is a broad term which is used in accordance with the various aspects such as money,
funds, loans and advances, etc. Meaning of Finance varies from industry to industry or from
companies to companies (Bonsu, 2020). In the following report, Victory Plc’s and Bemus Ltd.
cash budget and forecasted cash flow statement is prepared for the board of director meeting, so
that the organisation can state the ways to improve liquidity of the business concern.
MAIN BODY
Part A:
Report to Board of Director: -
There are various sources which from which the organisation can raise funds for the
business requirement. Procurement of funds directly depends on the sources from where the
organisation arranges its funds (Caniato, Henke and Zsidisin, 2019). An organisation can raise
funds in form of loans from banks or by issuing debentures in the open market or they can issue
right share to the existing shareholders. Best option in order to raise funds from open market is
by issuing debentures because company has to pay a nominal amount of interest which is lower
than the loans provided by the banks. If the organisation uses right issue then the holdings of the
present shareholders will be diluted, then they have to buy more shares in order to maintain their
same ownership in the organisation. It is not advisable for the organisation to take loans from the
bank as it is already suffering from liquidity crises. In case of Victory Plc., company can choose
one option from various option available. Cost of debenture would be borne by the company in
the upcoming 5 years.
1. Explain the difference between Cash flow and profit.
The basic difference between the profit and cash flow is that profit is net margin left after
deducting the operating profit from the total revenue of the organisation. Cash flows includes
transactions which have taken place in accordance to sale of the product, irrespective of whether
the cash flows are associated with the expenses incurred or inflow of cash. Net amount is
calculated after deducting cash outflows from total cash inflows. These cash flows are managed
in the financial statement known as Cash Flow Statement, which is mainly includes three
segments that are investing activities, operating activities and financial activities.

2. Explain working capital and also explain the effect of change in working capital.
Working capital is amount required by the organisation in order to deal with the day to day
activities of a business concern (Di Pietro, 2020). These funds facilitate in paying routine
payments, short term payments and finances used in the procurement of raw material. Working
capital can be sourced from various sources such as long term finances, spontaneous working
capital and short term finances. Short term sources include short term loans, commercial paper
and trade deposits. Long term finances include provision for depreciation, debentures, share
capital and profits. Note payable and bill receivable are few example of spontaneous working
capital. Working capital is calculated by subtracting current liabilities from current assets. There
are various types of working capital such as seasonal working capital, reserve margin working
capital, variable working capital, special variable working capital, gross working capital and
permanent working capital. In order to achieve organisational efficiency, an organisation needs
to work on the fulfilling the working capital cycle of the business concern. Working capital cycle
is defined as the time duration to require to convert the raw material into cash. Short working
capital highlights that the organisation needs less time to convert the raw material into liquid
assets (Finance, 2019).
Effect of liquidity on various activities is as follows:
1. Effect on Operation activities: Cash flow from operating activities includes activities
which are of recurring nature and generates revenue and expenses related to the
production. Level of liquidity affects the creditworthiness of a business concern. An
organisation that have a significant amount of liquidity does not to do much for the loans
from the banks. But business concern that does not have a significant liquidity in their
business, this type of firms has to try hard for the credits as they already lag to meet the
daily requirements of the funds.
2. Effect on Investing activities: Investing activities includes activities which are
concerned with the sales and purchase of assets or investment. For example, an
organisation purchases a machinery for its business operations, that will ultimately
increase the total assets of the company as well as causes outflow of cash, that will
indirectly reduce the cash available in the management (Hussain and et.al., 2019).
3. Effect on Financing activities: Cash flow from financing activities includes change in
number of share issued, securities, redemption of debenture and long term loans.

Liquidity is effected by the financing activities such as decrease in the liability,
redemption of debenture of the business concern (Lepone and Wong, 2018).
3. State the steps to improve the cash flow of Victory Plc.
Company can use the following steps to improve the cash flow:
 To persuade their debtors to pay early they need to provide cash discounts to their
retailers and wholesalers.
 Companies have to check its previous balance of provisions in order to make the new
provision, so that extra provision is neglected which directly affects the profitability of
the business.
 They solely need to focus on the payment received from the suppliers and avoid disputes
which directly affects the working cycle of the organization.
 In order to increase the valuation of the company and its profitability the profit needs to
be carried forward, these funds will be invested by the business in different activities to
increase profitability.
Cash Flow forecast of Next 5 Years( Figures in £ Million)
Particulars 31/12/22 31/12/2
3
31/12/2
4
31/12/2
5
31/12/2
6
Cash Inflow -
Sale with wholesaler 324 350 378 408 441
Sale with retail shops 35 35 175 175 175
Clothing Sale 5 6 7 8 9
Total Cash Inflow 364 391 560 591 625
Cash Outflow -
Payment of Tax Liability 4
Cost to Open Retail Outlets 26 26 156 156 156
Payment of Disputed claim 8
Total Cash Outflow 38 26 156 156 156

Net Cash Inflow Expected 326 365 404 435 469
On the basis of above forecasted cash flow statement the following conclusion can be made that
Victory Plc. will regularly gain profits from its business operations. Business concern needs to
control on their operating cost so that profitability can be improved. Liquidity ratio directly
influences the working capital requirement of a business concern. They can generate cash by
limited sources such as retail activities (Li, 2022).
PART B
1. Prepare the Cash Budget for Bemus Ltd. for 4 consecutive months from March 2022.
Cash Budget
Particulars
Marc
h April May June
Opening Cash balance 1380 5950 -98344 -47655
Cash Collection
Cash received from Sales 80100
11490
0 89250 89430
Total Cash inflows 80100
11490
0 89250 89430
Cash Outflow
Purchases for the resale of goods 35100 92000
10650
0 76200
Overheads 22000 17500 16000 19500
Rent 36000
Purchase of delivery vans 43400
Shop fittings 15000 7000
Drawings 0 6894 5355 5365.8
Outstanding tax Liability 58800
Annual Salary to Bemus Daughter 2050 2050 2050 2050
Total cash outflows 74150 21324 13690 14651

4 5 6
Net cash balance 5950 -98344 -47655 -57086
2. Prepare an analyse report of cash budget of David Bemus.
Analytical Document for the management of Bemus Ltd.
David Bemus has a corporate of operating the high store on Bern –on – Sea. For this, it is
recommended to the top organisation of David Bemus that giving to the numbers mention of
arrivals and discharges of cash, also considering the sales is that all the income which was earned
by the concern was on the credit basis. So, it should manoeuvre to improve its cash transactions
by proving more markdowns and attracting the clients is giving trade rebate for the cash
expenditures made closely during the sales (Ratanavararak, 2018). Also, the firm is incurring so
much of the operational and direct expenditures which can be narrowed by meeting the
exploiting the revenue of the object. The acquisition could be done with the less outlay by asking
the contractor to give trade deduction and cash rebate for immediately making the payment.
Though the net cash balance for the month of April, May and June is presenting the undesirable
amount which clearly portrays that the expenditures are more than the arrivals of cash. The
preceding months concluding balance impact the following year amounts as it gets transported as
the initial cash balance. So, it is very significant to maintain the every month’s cash budget
suitably. Moreover, the drawings that are suffered by the occupational could be reserved from
the corporate expenses, because these are in the name of individual spending for which the
corporate is not accountable to be paid. The overhead for the corporate unit is happening a huge
amount considering the transactions, which also should be narrowed duly for having a profit of
the company. It will assist the administration in maintaining a fluidity position of the firm by
giving a concern that the cash balance for the m months are suffering losses. The prime thing the
company should do is to make the cash disbursement and sales. So that it will not happen in the
next months and the firm will able to determine the debt which has been paid by the company
regardless of the sales and purchases. The unsettled tax liability should also be satisfied for the
preceding months, as it impacts the Cash and current balance and balances of coming months
(Viriyasitavat and et.al., 2019).

CONCLUSION
The above report states about the Forecast of Cash flow of the Victory Plc and
recommendation by the Board of Directors. Organisation is planning to raise 100 million pounds
from the market. The organisation has to select an option from the various option available to
credit facility. There are different sources that’s are considered while preparing Cash Flow
Statement for 5 years. In this report Part B consists of preparing Cash Flow Budget for Bemus
Ltd. And recommendation has been made on the basis of such budget.

REFERENCES
Books and Journals
Bonsu, S., 2020. Stakeholder Primacy: The Sustainability Schema of Business. Journal of
Finance, Accounting & Management, 11(1).
Caniato, F., Henke, M. and Zsidisin, G.A., 2019. Supply chain finance: historical foundations,
current research, future developments. Journal of Purchasing and Supply
Management, 25(2), pp.99-104.
Di Pietro, F., 2020. Crowdfunding for entrepreneurs: Developing strategic advantage through
entrepreneurial finance. Routledge.
Finance, B., 2019. OUR SPECIALTIES AND EDUCATIONAL PROGRAMS.
Hussain, H.I. and et.al., 2019. Firm performance and family related directors: Empirical evidence
from an emerging market. Contemporary Economics, 13(2), pp.187-204.
Lepone, A. and Wong, J.B., 2018. The impact of mandatory IFRS reporting on institutional
trading costs: Evidence from Australia. Journal of Business Finance &
Accounting, 45(7-8), pp.797-817.
Li, W., 2022. Research on the Development Path of Digital Inclusive Finance Based on
Convolutional Neural Network. In International Conference on Cognitive based
Information Processing and Applications (CIPA 2021) (pp. 474-479). Springer,
Singapore.
Ratanavararak, L., 2018. The impact of financial and trade integration on business cycles in
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pp.215-223.
Viriyasitavat, W and et.al., 2019. Blockchain and internet of things for modern business process
in digital economy—the state of the art. IEEE Transactions on Computational Social
Systems, 6(6), pp.1420-1432.
Yeo, J.L. and et.al., 2020. September. Time scheduling and finance management: university
student survival kit. In 2020 IEEE Student Conference on Research and Development
(SCOReD) (pp. 1-6). IEEE.