Budget Report for Gaia Ltd: Cash Budget, Sources of Finance, Financial Ratios, and Flexible Budget

This report provides insights into the cash budget, sources of finance, financial ratios, and flexible budget of Gaia Ltd. It includes recommendations for optimal cash flow, financing options, and improving financial ratios.

Sample

INTRODUCTION
Finance is termed as value, is to define as value, monetary exchange and financial assets.
It involves a number of investment securities for the future cash flows it can be grouped into
three general portions like public, corporate world and personal finance (Craigie and Pressey,
2022). In the underlying report, cash budget of Gaia Ltd is to be prepared and also benefits and
drawbacks of sources of fiance are also determined. In addition the report includes analysis of
financial ratio of Gaia Ltd and also preparation of Flexible budget.
PART A
1.Cash budget of Gaia Ltd
It is a in depth budget of cash receipts and cash payments constituting both revenue and
capital items for the budget period. This budget is geenrally divided into two parts giving
detailed evaluations of cash receipts and cash expenditures. Calculations of cash receipts are
prepared on monthly basis and relies upon estimations of cash sales, collection from trade
receivables expected receipts from other sources like sales of assets and borrowings
2.Recommendation of cash budget
The Gaia Ltd should keep the optimal cash in each month as organisation spends more
money in marketing expenses so that in the last month entity has not enough cash. In the month
of July entity has repay the loan but Gaia Ltd has insufficient cash to pay off the loan. In the
month of July is depicting the negative cash balance. If the organisation has limited cash flow
then it must to set up a line of credit. If they have spend the money then enterprise can recover
the money in future. The enterprise must required to offer the payment terms only one month so
that cash is received earlier (Fielding, 2019. If the selling price of the products is low, it is
negative effect on the margin.
3.Sources of finance
It consists of the equity, debentures, borrowings, venture capital and letter of credit.
These sources of funds relies on the business conditions. They are depended on the time interval,
ownership and control. It is very essential term when the entrepreneurs initiates the enterprise.
There are number of sources that are accessible by organisations. The sources of finance are
grouped into the long term and short term. Gaia Ltd are listed in the London stock exchange and
are required development of the business so that it raising the capital through issue of shares. The

Gaia Ltd is accessible various choices for raising the money such as debt, long term loan and
venture capital. But the best option of Gaia Ltd is to acquire funds through venture capital as it
furnishes the lower risk of the entity and company is not liable to pay the interest at regular
interval. It is the best option of raising the fund to Gaia Ltd (OGUNYEMI, 2019).
Merits:
 Huge capital can be finance through venture capital and shares.
 There is no requirement to make monthly payments.
 They assists in raising publicity.
Demerits
 The total cost of financing is expensive.
 Both of the sources are required the formal reporting structure and board of directors.
 Due diligence is essential.
PART B
Calculated the financial ratios of Gaia Ltd
Gross profit margin: Gross profit * 100 / net sales
Operating profit margin: Operating profit * 100 / net sales
Return on capital employed: Earning before interest and tax * 100 / capital employed
Assets Turnover: Sales / Total assets
Current Ratio: Current assets / current liabilities
Acid Test Ratio: Current assets- inventory / current liabilities
Inventory days: Average inventory * 365 / Sales
Trade receivable days: Average debtors * 365 / sales
Trade Payable Days: Average creditors *365 / purchases
Working capital cycle period: Inventory days+ receivable days- Payable days
Gearing ratio: Long term loan * 100/ Capital employed
Interest coverage ratio: Earning before interest taxes / Interest
Recommendation of different types of financial ratios
In year 2020 the Gross profit ratio is improved as compared to year 2019. Positive gross
profit ratio is a favourable sign of effective management (Yazbek, 2022). The entity should
reduced its marketing and administration expenses so that entity can earn high net profit and

Gaia Ltd should lend the money through issue of shares instead of debt as through debt the entity
bears interest expenses. The optimal current ratio is always 2:1, but in the present condition it is
1.43:1, organisation should decline the current liabilities.
PART C
Preparation of flexible budget
It adjusts the volume levels of the Gaia Ltd. It always flexes with an entity's modification
in costs. It offers the variable rates per unit but it does not offer the fixed cost.
Recommendation of flexible budget
The entity sold its product at cost less than its production costs that the organisation bears
net loss on 25000 units. The enterprise should decrease the overhead expenses. If the entity
manufactured 35000 unit then earns higher profit as compare to 25000 unit. The business should
not sell the 25000 unit as company suffer high losses (Спатаева, Бейсенова and
Нурмухаметов, 2019).
CONCLUSION
The above report discusses about the cash budget of Gaia Ltd. It provides the information
regarding the cash inflows and cash outflows over a particular period of time. The financial
ratios tell regarding the relationship between two accounting figures. It is not just comparing
various numbers from the financial statements but also comparing the figures of other companies
to examine the financial. The Gaia Ltd acquires money through venture capital and issue of
shares.

REFERENCES
Books and Journals
Craigie, I.D. and Pressey, R.L., 2022. Fine-grained data and models of protected-area
management costs reveal cryptic effects of budget shortfalls. Biological Conservation.
272. p.109589.
Fielding, P.J., 2019. How to Manage Projects: Essential Project Management Skills to Deliver
On-time, On-budget Results (Vol. 160). Kogan Page Publishers.
OGUNYEMI, A.O., 2019. REFORMING AND MODERNISING NIGERIA’S FEDERAL
BUDGET PROCESS, 1999-2017: A HISTORICAL AND LEGAL
ANALYSIS. HISTORICAL YEARBOOK, 16(XVI). pp.81-98.
Yazbek, A., 2022. Implementing a Custom ERP in Nine Months and on Budget With Cisco
Systems. Available at SSRN 4113315.
Спатаева, С.Б., Бейсенова, Л.З. and Нурмухаметов, Н.Н., 2019. Issues of implementation of
the public budget policy of Kazakhstan. Экономическая серия Вестника ЕНУ им. ЛН
Гумилева., (4). pp.162-176.