Cash Flow Forecast and Budgeting for Victory Plc and Bemus Ltd

Finance

Contents
INTRODUCTION...........................................................................................................................2
PART A:......................................................................................................................................2
1.Difference between profit and Cash Flow: -.............................................................................2
2.What is Working Capital and how change in working capital affects cash flow: -..................3
3.Steps to improve the cash flow of Victory Plc: -......................................................................4
PART B:......................................................................................................................................5
1. Prepare the monthly cash budget for Bemus Ltd. For the consecutive 4 months from March
2022.............................................................................................................................................5
2. Prepare an analytical document arising of recommendations based on the cash budget for
David Bemus...............................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Finance is a broader term which includes multiple activates used by various entity’s
according to their industry and type of work they perform. It includes banking, capital markets,
investment, etc. to be performed by respective companies (Beladi, Deng, and Hu, 2021). In this
report forecasted cash flow statement and cash budgets has been prepared for Victory Plc and
Bemus Ltd and recommendation has been made with respect of source of finance to the board of
director of Victory Plc so that their liquidity ratio can be improved.
PART A:
Report to Board of Director: -
There is multiple source of finance from which the organisation cab raise funds that they
require in order to expand their business. Raising of funds from different sources directly
depends upon the need of organisation and the type of capital structure they follow in their
business. The entity can raise funds from issue of debentures or take loan from the bank or they
can issue right shares to their existing shareholders (Sarkar, and et.al., 2019. The best option
which must be obtained in order to raise £ 100 million is through debentures as the rate of
interest the company have to pay is 2.50 only. If the organization used right issue option, then
their equity will be diluted. The loan option will be given is not advisable to victory plc as the
tenure of loan is of 15 years which is not viable as the organization is already suffering liquidity
issues. The best option in the given circumstances for victory plc is to raise funds from debenture
holder because the cash flow forecast they evaluated below shoes the positive impact on the
organizations profitability if they earned as expected. The interest cost can be easily managing
by the entity is desired cash flows they achieved in the given period of 5 years.
1.Difference between profit and Cash Flow: -
The main difference between the profit and cash flow is that profit simply indicates the net
margin that organisation earns after deducting all the operating expenses. Whereas cash flows
indicate the flow of cash throughout the year within the organisation. Both profit and cash flows
are important for an enterprise as they both are critically important for them. For determining the
profit, the entity needs to prepare income statement which is prepared by following accounting
standards as these statement is prepared on accrual basis. Whereas cash flows of the entity are
depicted by preparation of cash flow statements (Rashid, and Hersi, 2021). In a business