(Solved) Business Finance- Assignment
Added on 2019-12-28
14 Pages4171 Words160 ViewsType: 160
Finance
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BUSINESS FINANCE 1
Table of ContentsINTRODUCTION ...............................................................................................................................3TASK 1.................................................................................................................................................31) Showing a clear understanding of the difference between profitability and cash flow and how these are stated in the organization accounts...................................................................................32. Explaining the application of the concept of working capital management to the company and how the present-day condition is a reflection of how the enterprise in managed. ..........................53. Analysing the above discussed method and understanding which will be best for making decision in present case....................................................................................................................6TASK 2.................................................................................................................................................71) Describing the understanding of the stages of the capital budgeting process and of the chief capital investment appraisal methods..............................................................................................72 Application of methods applied to the projects..........................................................................103. Analysing the best suitable methods for making decisions......................................................11CONCLUSION ..................................................................................................................................11REFERENCES...................................................................................................................................122
INTRODUCTION Business finance is a aspect that embrace a broad range of functions and subject arearotating around the governance of money and other precious assets. It is the fundamentalcomponent for various kinds of the organisation and thus keeps them operative. Each and everyfunction which executed by the company require finance so it can be stated that they are the lifelineof the business. Business finance is essential term which help in managing the financial gain andexpenses, profit and loss and various investments of the business enterprise Business financetherefore regards to wealth and credit made use of in concern (Bierman and Smidt, 2012). It pertainto procural and use of funds so that company may be competent to execute out their functions ineffective and efficient manner. In this report, various aspect of managing business finance will bestudied in the context of provided case study of Wild Frontier Builders LTD. It is propertymaintaining firm providing buy to let market. In this report, a clear understanding of the distinctionbetween profitability and cash flow will be provided. Also, the steps needed to enhance businessworking capital management will be provided. The stages of capital budgeting process will bediscussed. TASK 11) Showing a clear understanding of the difference between profitability and cash flow and how these are stated in the organization accounts.In order to maintain financial status of Wild frontier business Ltd, it is important to makefinancial gain and assure cash flow availableness in present company. Net profit is the result bringforth by anbusiness by managing their business functions . Cash flow is the balance sum of money owned bycompany after compensating for all expenditure and financial loss from their present cash. Avariation between net income and cash flowis developed because of modification that are done in their management which is presented asfollows (Hope and Fraser, 2013).Cash flow prediction document will evidence all the cash dealings which are performed incompany in actual time period. The accelerative cash can yielded with maximum sales in businesswhich boostthe productivity and proficiency of business. The entrepreneur of Wild Frontiers Business Ltdinvest significant amount of capital with the objective to earn higher amount of return in future(Wampler, 2010). The cash created from the sales of idle assets can also be used to meet working3
capital needs of business. The method of computing income and expenditure statements is entirelydifferent as therein all cash inflowsand outflows are reasoned to show the actual position of company in market. Element which arewell thought out in the computation of actual net income consider diminution, bad debts, write off, physical resources sold-out at a gain or loss and accessibility of high stock ofmerchandise which is not used(Kilfoyle and Richardson, 2012)From the critical assessment of present case study of Wild Frontier Ltd. (WFB) it isidentified that firm operates in property business. It provide broad range of services like, plumbing,roofing, building works and general repairs. The improvement in buildings by WFB will the leadingbusiness areasof present company (Lee, Johnson and Joyce, 2011 ). There is different grounds which assist inconfirming the present financial position of WFB in regards to thealteration that happens in income position and cash flow which are presented as follows:Bank overdraft- It is a facility which permits individual to continue withdrawal of moneyfrom bank account even it has no funds and the present balance slip down below the zero. It is loanfacility where bank increases the credit limit up to a maximum amount. It is significant source offunding that can be used by entrepreneur to fulfil cash needs of business (Phillips Costa .2007)Since, its inception from the case study that, the present situation of company is in risk due to thepresence of bank overdraft which exist in company for approximately9 months. The idle of this high-risk bearing debt liability in the company reduces not only cashflow as company is required to pay high interest charges on overdrawn amount. Therefore, decreasein cash position will lead to cut down in thenet income of the Wild Frontier Ltd (Truong, Partington and Peat, 2008).Calculation of bank overdraft in Profit and Loss statementsTable 1: Extract of P&L statement of Wild Frontier Ltd.Particulars Amount ParticularsAmountInterest cost ()Income()Bank overdraft()Balance Carry forward()4
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