Business Report on Financial Management and Working Capital

Business report
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Table of Contents
Executive summary..........................................................................................................................3
Task 1...............................................................................................................................................3
1. Explain....................................................................................................................................3
1.1. Profit and cash flow.........................................................................................................3
1.2 Working capital, receivables, inventories and payables...................................................4
1.3 Impact of change in working capital on cash flow...........................................................5
2. Impact on the company's operational management on the financial results...........................5
3. Step which are recommended to improve company's cash flow through better working
capital management.....................................................................................................................6
Executive Summary.........................................................................................................................7
Task 2...............................................................................................................................................7
Monthly Cash budgets for January to April 2021.......................................................................7
Challenges and recommendations for the management of company..........................................8
References......................................................................................................................................11
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Executive summary
Business report is related to finance activities that involver and make financial
management of business concern that may include revenue and capital management to ensure the
smooth financial health of the business (Deloitte Access Economics, 2017). This report include
different business practices of Trend Ltd (TL) which manufactures gym cloth and footwear.
Report include the basic concept of profit, cash flow, working capital, receivables, inventories
and different payables are discussed and make an impact of financial result of company which
are determined. Steps to improve company's which are related to better working capital
management.
Task 1
1. Explain
1.1. Profit and cash flow
Profit: It is shown as per the revenue in excess of cost, in the accounting standards, profit
refer to the financial benefits which bis comes when total revenue of the business. Which are
helpful in exceeding the total expenses of the company over the revenues. Profit of the company
are either retained by a company to provide the basic future operation's or is distributed to
different shareholders as a dividend. Further it can be said that obtaining profit and loss account
which is known as the income statement of the company (Polonsky and Waller, 2018). A
company is always related to the profit and loss account in the different stages – first one of
manufacturing profit which is known as gross profit. Second stage is related to other
administrative and selling expenses which are mainly used for reduced from gross profit at the
time of operating profit. Further, all the non-operating expenses and income of the company are
adjusted for the arrive at final figure and make net profit which is also known as net income of
the company. This type of profit is also related to adjusted with the corporate tax to arrive at the
figure of the profit after receiving tax. This receivables amount is known as profit available to
shareholders.
Cash Flow: Cash flow is related to total cash flow of cash in a business which are related
to concern or the specified period. There are two components which are used that is cash receipts
which are related to inflow of the cash payment are taken as outflow. When inflow of the cash
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exceed and make an outflow. When inflow of the cash exceed the outflow of the business is
known as favourable position of business and generate a cash flow for company's valuable
stakeholders. Further it can be said that financial statement of the company to assess an overall
cash flow which are related to different position during year or reported period. This is basically
relayed to operating activities, cash flow from investing and financing activities. This is related
to the favourable position for the different business and company to generate more value for
stakeholders.
Difference between Two terms: The most important difference between profit and cash
flow is that profit which are related to accounting entity and used to report net income in
businesses. While cash flow is related to inflow and outflow of the real cash within an business
organisation. It can be said that profit, represent liquidity of the business (Charter, 2017). Further
another difference is related to profit of company is generated using accrual accounting while
cash flow is related to using cost accounting system.
1.2 Working capital, receivables, inventories and payables
Working Capital: working capital include mainly two elements; current assets such as
cash, receivables etc. and current liabilities which are related to payables short-term loans etc.
this will represent the net difference of the two.
Receivables: Account receivables is related to those people who owe the money to the
business such as different trade debtors. These people are the current asset of company and make
a reflect such as amount that will generate the revenue for company.
Inventories: Inventories are related to all merchandise and manufacturer the company
and make a trade in. it can be related to the raw material, intermediate products which are
finished goods.
Payables: Account payable are related to people who are owe money to business, such as
trade creditors. These are the liabilities and reflect the amount that will be paid by the company
in near future. Companies material are work and manage as a separate system for negotiating
with trade creditors to manage creditor's payment cycle.
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