Business Finance: Cash Budget, Accounting Equation, Stock Exchange Listing, Stakeholders, Profit vs Cash

This report covers various topics related to business finance, including cash budget, accounting equation, stock exchange listing, stakeholders, and profit vs cash. It provides insights on how to manage finances for long-term sustainability and increase profitability. The report also includes examples and working notes to help readers understand the concepts better.

Business Finance

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
Cash budget for the business..................................................................................................................3
TASK 2..........................................................................................................................................................5
2.1 Explaining accounting equation and reason for its always balancing with example.........................5
2.2 Benefits which company can gain by having its shares listed on stock exchange..............................7
2.3 Stakeholders in large listed company like Marks and Spencer..........................................................8
2.4 Profit as a reliable indicator of cash balance and difference within profit and cash..........................9
CONCLUSION.............................................................................................................................................11
REFERENCES..............................................................................................................................................11

INTRODUCTION
The money created by company owners with the goal of meeting financial demands or needs
is referred to as business finance. It is the responsibility of the leader to offer adequate financing
to all divisions in order to guarantee that business operations of the company run smoothly.
There are numerous forms of finance that a business unit might use to raise cash, including stock
offering, bank loans, and so on. The current report is determined by a variety of example
situations that will help you comprehend the notion of a cash budget and its importance. The
analysis also indicated how accountancy formulas may be utilized to demonstrate how assets,
obligations, and owner's equity are related (Grossmann, Mooney and Dugan, 2019). It outlines
the advantages that M&S will get from being registered on the stock exchange, and also
information on the organization's directors. It also demonstrates the differences between profit
and cash flow based on certain factors.
TASK 1
Cash budget for the business
Jan Feb March
£ £ £
Receipts
Capital 10000 7041 7821
Cash receipts from sales 1260 960 885
Receipts from credit sales 2940 2240 2065
Total Cash receipts (A) 11260 10241 10771
Payments
Drawings 800 800 800

computer purchase 499
motor purchase 3200
Purchase 2800 1500 1750
Telephone expenses 120 120 120
Total Cash payments (B) 4219 2420 5870
Net receipts (A- B) 7041 7821 4901
Balance brought forward 0 7041 7821
Balance carried forward 7041 7821 4901
Working note=
Particulars Jan Feb March
£ £ £
Sales 4200 3200 2950
Cash receipts from sales 4200*30=1260
3200*30% =
960
2950*30% =
885
Receipts from credit sales 4200*70=2940
3200*70% =
2240
2950*70% =
2068
From the above-mentioned three-month cash budget, it can be deduced that the indicated
firm's ending balance at the end of every month is favorable. Cash is one of the most important
indicators of advancement that aids in determining how successful a company may be. On this
premise, it can be deduced that the corporation generates transactions, which aids in the
generation of money for the company. Clients may also acquire purchases on credit through the
publicly traded company, which allowed the firm produces 70% of its revenues. Only 30% of

real cash sales are used to help the company fulfill its costs. Enterprise incurs minimum costs in
order to achieve its company objectives. This covers the cost of a laptop, a transport, graphics,
and phone calls, among other things.
On this basis, it can be determined that the firm has favorable results in January,
February, and March, with 7041, 7821, and 4901, respectively. As can be observed from the
budgetary control, the stated organisation is putting up significant attempt to accomplish a better
liquidity position. In order to maintain a solid financial competitive advantage, modifications in
the proprietor's individual withdrawal habit are required (Al Rahahleh and et.al, 2019). It may be
concluded that a firm can reap a variety of advantages by creating a cash budget in order to
increase profitability and long-term viability. These advantages include precise cash available
statistics, determination of necessary level finances, efficient management, and maximum asset
utilization. This assists in making strategic decisions about the use and allocation of cash,
allowing for increased production by overcoming unanticipated events. Process of creating a
cash budget can help to get the necessary abilities to create a competitive edge by ensuring long
term sustainability.
This also enables the business to resist going into debt since it becomes more creative,
and the truth of the company can be determined by examining at its financial condition.
Assessment of weak regions may be done efficiently, allowing for the correct and equitable
communication of financial information.
TASK 2
2.1 Explaining accounting equation and reason for its always balancing with example
The Accounting Equation (AE) is a key notion that aids in the comprehension of the balance
sheet's essential tenets.
Assets equal liabilities + shareholder equity is the equation in question.
It is a widely acknowledged formula for balancing a balance sheet. This is now the
foundation of the double entry system, which assists in obtaining reliable data for judgments.
The main motivation for this is because information is verified in different accounts since both
sides are considered (Bellavitis and et.al, 2017). Here on premise, it can be stated that the major

cause for the balance sheet's balancing is due to the use of the dual entry book. Accounting
equations is completing the task of delivering relevant, dependable and other data via preparing
the financial statements. It is critical for the business to provide comprehensive information to
financial planning users in order to prevent unnecessary legal obligations. It assists in
maintaining good operations in the sector in order to accomplish the firm's stated goals by
referencing to the financial statements and comparing to the summary supplied in the form of a
balance sheet.
Regardless of the size, nature, kind, or other characteristics of the organisation, the focus
is on constructing a position financially statement using accounting equations. This enables us to
obtain advantages in a variety of forms, allowing us to satisfy the high computation needs of the
organisation in a more effective manner. For example, a corporation may buy 500-dollar
equipment with cash to complete its operations. Cash will be credited when it leaves the
company and the machine will be deducted in this operation. This activity aids in the
comprehension of a total transaction twofold impact, allowing the financial state report to be
balanced (Adebiyi and Banjo, 2017).
Let's take a look at a few real-world activities to see how they affect the accounting equation.
Consider the general required by the relevant during XYZ's first month of employment:
1. Company XYZ receives a $10,000 investment from the firm operator. Both the money asset
and the income statements equity will grow by $10,000 as consequence of such transactions. The
following is an example of the formula:
XYZ purchases $3,000 worth of goods. There is a $3,000 gain and loss in assets in this scenario.
The cash account will go down, but the equipment account will go up. It's how the formula
statement might look like:

On credit, XYZ purchases $1,300 in consumables. Overall assets and accounts payable liability
rise by $1,300 as a result of these transactions. The categories that are impacted include supply
and payable accounts. In the formula, the third payment would look like this:
2.2 Benefits which company can gain by having its shares listed on stock exchange
The term "listing" refers to the fact that remaining profits are traded on a share market.
There are many other sorts of stock exchanges, and listing a company's shares on most of the
stock exchanges is required for it to be registered. For a firm to be listed on a stock market, it
must meet all of the conditions. The firm's listing is critical since it improves the firm's search
exposure. The cause for this is that once a firm is mentioned, its goodwill grows, which improves
its procedures and operating. Furthermore, the user's faith in the firm grows as a result of the
listing since the business will not go elsewhere and will not deceive (Clark and Spraggon, 2017).
The following are the key advantages that corporations may obtain by registering their securities
to the public:
• The main advantage of listing for a firm is the greater access to cash. The reason for this is
because starting a company typically necessitates the use of cash. As a result, when the firm is
listed on a stock market, capital providers will have more trust in the organization and will give a
better foundation for getting funding.

• Other advantage of putting a firm on a stock exchange is the increased visibility in a
competitive industry. The rationale for this is because whenever a firm is listed on a marketplace,
additional individuals and institutions may obtain data about it. As a result, the firm's reputation
and exposure in the international markets will improve.
• Another advantage of putting the firm on the stock exchange is availability. This is due to the
fact that if the firm requires funds, it can decisions and actions and receive funds. Investors also
benefit from liquidity since they can move their money at any time and receive a return on their
investment.
• Another advantage of going public is that it renders the company's activities better accessible
and productive. The rationale for this is because whenever a firm is publicly listed exchanges, it
must comply with a series of things and rules. In addition, the corporation is required to disclose
a variety of reports and other data with stockholders as well as others. As a result, when a firm is
publicly traded, the business requirements are more transparent and efficient (Cumming and
et.al, 2019).
• Additionally, a firm's listing on a stock market gives it a level playing field when it comes to
pricing. The value of goods is judged on the basis of producers and consumers with the aid of the
stock market, and customers pay fair costs as a result.
2.3 Stakeholders in large listed company like Marks and Spencer
Stakeholders are individuals or groups of customers who are interested in the company's
business and are influenced by all of the firm's operations. There are numerous sorts of
shareholders in either organization that want the firm to run more smoothly. All of the personnel
involved with the organisation and its activities contribute to the successful completion of the
task. For a firm to succeed, all parties must be particularly pleased in order for corporate
objectives to be conducted properly and effectively. A big publicly traded firm, such as Marks
and Spencer, is required to have shareholder inside the corporation. The basis for this is that if a
firm has strong stakeholder trust, it will be able to function and operate more efficiently. There
are two sorts of shareholder in a major publicly traded corporation: internally and externally
(Zimmermann, 2020).

The organization's corporate stakeholders are those who are directly involved in the
firm's management and are concerned in the firm's management. Workers, owners, and managers
are often included in these inner key stakeholders. The outside shareholder of the firm, on the
other extreme, is made up of individuals who are engaged in the firm's earnings though not in a
straightforward manner. However, the company's success is extremely important to various
parties. Clients, suppliers, the administration, culture, investors, organized labor, and a variety of
other interests make up Marks and Spencer's various customers (Waleczek, Zehren and Flatten,
2018).
All of these different stakeholders have a vested interest and authority in the organisation.
This passion and power inspires people to work efficiently and effectively, resulting in improved
company governance. Whenever interest is strong, they will operate much more efficiently and
effectively. As a consequence, company operations will be expanded. This is due to the fact that
when stakeholders complete all of their responsibilities in an efficient and productive manner; it
leads to more efficient and productive performance. For example, whenever workers, who are
internal stakeholders in the firm, operate properly and effectively, the financial value improves.
As a consequence, the firm's work productivity will enhance, and as revenues rise, employees
will be given bonuses. Additionally, Marks & Spencer's stockholders, who are exterior to the
corporation, are stakeholders.
Shareholders are primarily concerned with improving the corporate accounting success.
As a result, they encourage the firm and its workers to work harder and more efficiently in order
to boost profits. Whenever sales revenue rises, so does the dividend given to the existing shares.
Furthermore, other illustration is the government, which is an outside investor in the firm but has
a strong interest in it. The rationale for this is that if a firm earns a fortune, the government was
able to collect more taxes. As a result, the government has little control inside the corporation but
a strong stake in its prosperity (Gunawan and Chairani, 2019).
2.4 Profit as a reliable indicator of cash balance and difference within profit and cash
Once all expenditures have been deducted from the overall sales received by the firm, the
profitability is the amount remaining. Any company exists to make money. It is believed that the
more the revenue, the better the firm. As a result, a larger level of profit must be made by the
firm in order for it to invest in growth. This is critical because profit is the grand total even after

expenditures have been deducted from the revenue. Profit is an excellent measure of a firm's
earnings since it shows how much money it has left over. As a result, this is beneficial to the firm
because profit is calculated by subtracting all directly and indirectly expenditures from total
revenue. As a result, this will show the firm's total cash position once all costs have been paid
and the final capital account has been reached (Kim, and et.al, 2019).
Profit, then, is a measure of a company's success. On the other extreme, cash position is a
useful sign of a company's performance. Even after cash outflows have been deducted from
expected revenue, the cash balance is what remains. Whenever the cash position is large, the firm
has strong liquidity; on the other hand, if the cash balance is low, the operations of the business
will be severely hampered. Whenever a firm's cash situation is strong, it means that the firm is
running well and that all activities are being handled effectively. As a result, profit made by the
firm may be used to determine the firm's cash balance. In addition, cash represents the firm's real
position, which is the amount of money left over even after costs are deducted.
Difference between profit and cash
Profit Cash
The revenue is the money remaining after all
expenditures have been deducted from the
overall revenue.
The inflow and outflow of capital inside a firm
is represented by cash.
The profit is equal to the revenues lower than
the total expenditure.
All cash inflows and outflows from
operational, investing, and financing activities
are included in the capital.
It includes all expenditures, both cash and non-
monetary, such as amortization (Kersten and
et.al, 2017).
It solely applies to money transfers and does
not cover depreciation.

CONCLUSION
It may be stated from the foregoing research that analysis is critical for creating strategic
decisions. The latest report includes data on the budget period, which indicates a favorable
outcome. Additionally, there are a numerous benefits to developing a cash budget, including
reliable and efficient access to the company's finances. The accounting equation and the
justification for always rebalancing the balance sheet are covered in this paper. The present
research examined at the benefits that a firm may get from having its shares publicly traded
companies, including such increased access to credit and so on. Internally and externally
investors are separate in major publicly traded companies like Marks and Spencer. The
discrepancy between cash and profit has been properly calculated and reported in the report.
REFERENCES
Books and Journal
Grossmann, A., Mooney, L. and Dugan, M., 2019. Inclusion fairness in accounting, finance, and
management: An investigation of A-star publications on the ABDC journal list. Journal
of Business Research. 95. pp.232-241.
Al Rahahleh, N. and et.al, 2019. Developments in risk management in Islamic finance: A
review. Journal of Risk and Financial Management. 12(1). p.37.
Bellavitis, C. and et.al, 2017. Entrepreneurial finance: new frontiers of research and practice:
Editorial for the special issue Embracing entrepreneurial funding innovations.
Adebiyi, A. J. and Banjo, H. A., 2017. Performance of small and medium enterprises in Lagos
State: The implications of finance. Acta Universitatis Danubius. Œconomica. 13(5).
Clark, J. and Spraggon, J., 2017. The Applicability of Micro Finance to Higher Risk Business
Ventures: An Experimental Study (No. 17/20).
Cumming, D. and et.al, 2019. New directions in entrepreneurial finance. Journal of Banking &
Finance. 100. pp.252-260.
Waleczek, P., Zehren, T. and Flatten, T. C., 2018. Start‐up financing: How founders finance their
ventures' early stage. Managerial and Decision Economics. 39(5). pp.535-549.
Gunawan, A. and Chairani, C., 2019. Effect of Financial Literacy and Lifestyle of Finance
Student Behavior. International Journal of Business Economics (IJBE). 1(1). pp.76-86.

Kim, W.J. and et.al, 2019. R&D, training and accessibility to finance for innovation: a case of
Vietnam, the country in transition. Asian Journal of Technology Innovation. 27(2).
pp.172-193.
Kersten, R. and et.al, 2017. Small Firms, large Impact? A systematic review of the SME Finance
Literature. World development. 97. pp.330-348.
Zimmermann, V., 2020. Innovation and Investment Finance in Comparison. In Contemporary
Developments in Entrepreneurial Finance (pp. 59-79). Springer, Cham.