MDL Financial Position

This project report focuses on the financial position of Mediterranean Delights Ltd. It discusses the concepts of profit, cash flow, working capital, receivables, payables, and inventory. It explains the differences between profit and cash flow, defines working capital, receivables, payables, and inventory, and explores how changes in working capital can impact cash flow. The report also provides information on the financial status of Mediterranean Delights Ltd. and suggests possible courses of action to improve cash flow.

MDL financial position

Contents
INTRODUCTION.......................................................................................................................................2
MAIN BODY..............................................................................................................................................2
Section (i)................................................................................................................................................2
Section (ii)...............................................................................................................................................4
Section (iii)..............................................................................................................................................5
CONCLUSION...........................................................................................................................................6
REFERENCES............................................................................................................................................6

INTRODUCTION
It is essential for companies to manage their financial position in an effective manner and
this can become possible by applying vital range of techniques. Apart from these techniques and
methods, this is essential for companies to know about key concept of accounting such as profit,
cash flow and many more (Babajide, Olokoyo and Taiwo, 2016). The project report is based on a
case study of Mediterranean Delights Ltd. With regards to this case study, various kinds of
concepts are included in the report such as cash flow, profit, working capital and many more.
MAIN BODY
Section (i)
(a) Define Profit and Cash Flow and show how and why they are different
Profit- Profit is income paid to the owner through an advantageous cycle of business
development as part of accounting. Profit is a productivity indicator, and is the key concern of
the owner in the business development income training process. It is common goal of all
business entities to gain higher amount of profit so that they can beat to their competitors.
Cash flow- Cash flow (CF) implies the increase or decrease of cash that a business, organization
or individual has. In finances, the term represents the volume, which is generated or consumed
over a certain period of time, of cash (currency). There are a variety of CF forms that are
essential for the activity and financial analysis of a company.
Difference between cash flow and profit:
Basis Cash flow Profit
Mean The difference between the revenue
produced and the overall expense
value can be determined.
At the other side, the value of cash that
comes from business can be specified.
How to
measure
To measure the worth of earnings,
business accountants generate a
declaration of profits.
When preparing cash flow statement to
get the interest of cash management
accountants from corporations

(b) Define Working Capital, Receivables. Payables and Inventory.
Working capital- In general, the term working capital can be defined variation between current
assets and current liabilities of a company. This capital is too useful for business entities in order
to make critical decisions for day to day operations and activities. In the absence of this capital, it
can become difficult for companies to manage their daily expenses. In other words, Working
capital is an operational liquidity measure accessible to a corporation, organization or other
body, particularly government bodies (Canales, 2016). Working capital is deemed to be part of
working resources along with fixed assets such as plant and facilities.
Receivables- Accounts receivables are valid credit statements for products purchased by a
company and/or for services provided by consumers but not compensated by them. In general,
these are invoices received by a company and are issued within an acceptable time period to the
consumer for payment. In order to manage receivables, companies calculate receivable turnover
ratios so that they can find out value of amount which they need to collect from customers and
other debtors.
Payables- Accounts payable are the cash owing by a corporation to its customers as a debt on the
balance sheet of a business. It differs from notes payable, which are debts generated by
structured records of the legal instrument. In order to manage payables, companies calculate
payables turnover ratios so that they can find out value of amount which they need to pay to their
customers and other creditors.
Inventory- The goods and materials owned by the corporation for the ultimate purpose of resale
are inventories or stocks. The key aim of inventory management is to establish the form and
placement of stored goods. Mainly companies have three types of inventories which are as
follows:
 Raw material
 Work in progress goods
 Finished goods

(c) Explain how changes in W/C can impact on cash flow. Examples
Working capital can affect cash flow of companies. This is so because of below
mentioned reasons which are as follows:
 Purchase of inventories- Cash flow of a company can be affected due to purchase of
stock. This is so because in order to make buying of inventories, companies need to pay
cash which results in affect on cash position. Though, this can be recovered when
purchased inventories are sold for cash (Jordà, Schularick and Taylor, 2016).
 Increase in trade receivables- When trade receivables increase then it indicates that
companies have possibility of generating cash from debtors. Due to this, companies’ cash
flow gets affected positively.
Section (ii)
 Profit- There is no exact information regards to profitability of company but they had
turnover of £50 million in last year. While their operating profit was of £5 million last
year.
 Accounts receivables- As regards the above-mentioned Mediterranean Delights Ltd., it
can be observed that they have a wide range of receivables and are liable to pay them on
a particular span of time. Their most receivables are their stakeholders, by whom they
took advance funds to produce products in the next deadline. Like this, the business
Delios has £1.5 million and a promised potential supply of goods.
 Accounts payable- The above-mentioned company has high-rise debt of amounts to £18
that increased by £2 relative to the previous year when it amounted to £16. Therefore,
this sum of debt is a kind of loan that can be billed to you to settle in compliance with the
period stated.
 Inventory- Mediterranean Delights Ltd. Supplies several chains of restaurants with its
own range of imported products. It is important to note here that they have all categories
of inventories and are liable for the production of raw materials, work in progress and
finished products.

Section (iii)
Points to mention as possible courses of action
This is essential for business entities for manage their cash flows and in order to improve
cash flow of company, there are different kinds of course of action which are as follows:
 Delay or postpone the investment program- In order to make investment projects,
companies need to pay huge amount of cash which results in lower cash flows.
Companies can enhance their cash flows by making prevention for investments
(Klopotan, Zoroja and Meško, 2018).
 Identify and sell any unwanted assets- This is also a way to improve cash flow of
companies. It can become possible by selling those assets which are not in used. By
doing so, companies can get higher amount of cash which is resulted as better cash flow.
 Minimize the expenditure on legal fees and settle the litigation as soon as possible- If
companies will minimize the expenses on legal fees then this will be easier for
companies’ to have higher amount of cash in their funds.
 Resolve the on-going disputes and improve relationships- Under ongoing disputes,
companies required paying cash and as a result they face issue of poor cash flow. If
companies will resolve their disputes then it will be easier to them to save cash in their
funds (Osano and Languitone, 2016).
So these are the ways which can be helpful in order to improve cash flow of companies in an
effective manner.
CONCLUSION
On the basis of above project report this can be concluded that finance is main element
for companies which needs to be considered in an effective manner. The report concludes about
role of working capital and its impact on companies’ cash flow. In the end part of report, ways to
enhance cash flow of company is concluded in a detailed manner.

REFERENCES
Books and journal:
Canales, R., 2016. From ideals to institutions: Institutional entrepreneurship and the growth of
Mexican small business finance. Organization Science, 27(6), pp.1548-1573.
Babajide, A.A., Olokoyo, F.O. and Taiwo, J.N., 2016. Evaluation of effects of banking
consolidation on small business finance in Nigeria. In Proceedings of the 23rd
International Business Information Management Association Conference (pp. 12522-
12540).
Jordà, Ò., Schularick, M. and Taylor, A.M., 2016. The great mortgaging: housing finance, crises
and business cycles. Economic policy, 31(85), pp.107-152.
Klopotan, I., Zoroja, J. and Meško, M., 2018. Early warning system in business, finance, and
economics: Bibliometric and topic analysis. International Journal of Engineering
Business Management, 10, p.1847979018797013.
Osano, H.M. and Languitone, H., 2016. Factors influencing access to finance by SMEs in
Mozambique: case of SMEs in Maputo central business district. Journal of Innovation
and Entrepreneurship, 5(1), p.13.