Understanding Finance

This study material covers topics like cash budget, sources of funds, financial ratios, sales budget and production issues in finance. It includes Excel sheets for cash and sales budget, calculation of financial ratios and explanations of funding sources. The subject is finance and the college/university is not mentioned.

Finance

Table of Contents
TASK...............................................................................................................................................3
PART A...........................................................................................................................................3
1. Use Excel to prepare Cash Budget for the business from April to September.......................3
2. Give recommendation on the Cash budget on the basis of budget.........................................3
3. Explain various sources of funds and the best source of fund in the context of Gaia Ltd......3
PART B............................................................................................................................................4
1. Calculate ratios by using the financial statement provided. ...................................................4
2. Compare the performance of the business in regards to profitability, gearing, liquidity and
gearing ratio................................................................................................................................4
PART C............................................................................................................................................5
1. Construct Sales Budget for the company................................................................................5
It is affixed in the Excel sheet.....................................................................................................5
2. Explain the issues related to production and manufacturing of Gaia Niche EV.....................5
REFERENCES................................................................................................................................6

TASK
PART A
1. Use Excel to prepare Cash Budget for the business from April to September.
Attached in Excel
2. Give recommendation on the Cash budget on the basis of budget.
The cash budget shows an continues increase in the number in the subsequent period. The
organisation can reduce its credit sales to increase the cash available to the organisation. The
organisation can also reduce its time period to increase the flow of money (Alves and et.al.,
2019)
3. Explain various sources of funds and the best source of fund in the context of Gaia Ltd.
Gaia Ltd is listed on London Stock Exchange and in order to raise funds the organisation
is decided to raise funds by issuing equity shares in the market. This type of fund is a permanent
liability for any business organisation which the organisation has to share its profits with its
shareholders.
Business needs funds in order to finance their funds for conducting business operations. There
are mainly two types of funds namely, short term funds and long term funds.It is very important
for the business organisation to analyse the different sources of funds in order to carry
the business forward (Corrigan, 2019). The funding is defined as the financing in which
there is the contribution of the resources to finance and complete the project within the
business enterprises is related to any kind of investment which is required within the
enterprise. The sources of fund can be flowed out from retained earning, debt capital,
equity capital. These are also referred as types of sources of funds
It is identified that the businesses focus on maximising in retain profits by selling the
products or services to the customers. This is the most primitive way of channelising the
way of funding for any business organisation.
The debt is also known as the loan which is taken by the organisation from the private
banks. This can be taken in the form of securities in order to complete any project within
the business enterprise.
Advantages

There are various advantages of source of funds which are beneficial for the
company in long term investment. This can help the company in various aspect such as
for the development of the organisation and managing its finances. The funds taken
from the investment and banks have an advantage that the owner can utilise it in any
kind of investment project.
Disadvantages
The company can have a long term loan which need to be paid by the owner of
the organisation which is the demerit of the sources of funds. The another disadvantage
is that the source of fund the money which is been saved can also be withdraw which
will no longer help the owner in future investment.
Business organisation can opt for debts because it can be paid in a particular period of time and it
not a charge against the profit (Gumata and Ndou, 2020).
PART B
1. Calculate ratios by using the financial statement provided.
Provided in Excel sheet attached.
2. Compare the performance of the business in regards to profitability, gearing, liquidity and
gearing ratio.
Various ratios are calculated to determine the performance of the business in which
profitability ratio shows that in 2019 company has earned gross profit of 8.18% which have
increased to 8.56% in the year 2020. Liquidity ratio shows that the business is having enough
amount of current assets in order to pay its current liabilities. It is seen that in year 2019 the
organisation current ratio was lower than the standard ratio which have increase to 3.31 in the
year 2020.
Gearing ratio shows the available amount of profits for paying of interest payments. In
the following the companies gearing ratio has increased to twice within a year from 2019 to
2020.

PART C
1. Construct Sales Budget for the company.
It is affixed in the Excel sheet.
2. Explain the issues related to production and manufacturing of Gaia Niche EV.
In order increase their overall profitability of the organisation, it can reduce the cost of
the production by efficiently using the assets available. The organisation can also produce more
number of units to 35000 units in order to decrease per unit price of the product (Kliestik and
et.al., 2018).

REFERENCES
Books and Journals
Alves, L.A. And et.al., 2019. Soil acidification and P, K, Ca and Mg budget as affected by sheep
grazing and crop rotation in a long-term integrated crop-livestock system in southern
Brazil. Geoderma, 351, pp.197-208.
Corrigan, L.T., 2019. Accounting Narratives: The Presentation of History in Budget Making.
In Connecting Values to Action: Non-Corporeal Actants and Choice. Emerald
Publishing Limited.
Gumata, N. and Ndou, E., 2020. Did Loose Loan-to-Value and Repayment-to-Income Ratios
Amplify Commodity Price Booms on Activity in the Manufacturing Sector?. In The
Secular Decline of the South African Manufacturing Sector (pp. 229-241). Palgrave
Macmillan, Cham.
Kliestik, T. and et.al., 2018. Bankruptcy prevention: new effort to reflect on legal and social
changes. Science and Engineering Ethics, 24(2), pp.791-803.
Wang, H. and et.al., 2021. Network design for maximizing service satisfaction of suppliers and
customers under limited budget for industry innovator fourth-party logistics. Computers
& Industrial Engineering, 158, p.107404.