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Business Finance Assignment (Solution)

   

Added on  2020-02-14

17 Pages4052 Words87 Views
Finance
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BUSINESS FINANCE
Business Finance Assignment (Solution)_1

Table of ContentsINTRODUCTION...........................................................................................................................3PART 1............................................................................................................................................31. Explaining the difference between profitability and cash flow...............................................32. Explaining the application of working capital management concept......................................63. Analysis of working capital management in the business.......................................................7PART 2............................................................................................................................................81. Explain Capital budgeting process and its methods................................................................82. Application of methods applied to the projects.....................................................................133. Analysing the best suitable methods for making decisions 13CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................152
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Index of TablesTable 1: Extract of income statement of WFB................................................................................5Table 2: Extract of cash flow statement of WFB.............................................................................5Table 3: Extract of trading and profit and loss account...................................................................6Table 4: Extract of cash flow statement...........................................................................................6Table 5: Calculation of payback of Call of assassins....................................................................10Table 6: Calculation of payback period of Coal mining& oil extract............................................11Table 7: Calculation of NPV of call of assassins...........................................................................11Table 8: Calculation of NPV of Coal mining and oil Extract........................................................12Table 9: Calculation of IRR...........................................................................................................12Table 10: Calculation of ARR.......................................................................................................133
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INTRODUCTIONFinance is the lifeline of every business which acts like a boat to rescue the business usersfrom the situations of bankruptcy. The business worships finance as the God to take care theirbusiness operations by supplying adequate financing requirements. This report has fragmentedinto two parts which show the significance of finance in different contexts. In the first part, WildFrontiers Builders Ltd has been selected which deals in the construction industry and on theother hand, part 2 has selected Eye water which provides designing services in the video games.The first part of the report focuses on financial reports and working capital management. The lastpart of the report has stressed on the capital appraisal techniques.PART 11. Explaining the difference between profitability and cash flowGeneration of profit and cash flow availability in existing business will be beneficial for thebusiness to maintain its financial position (Lien, 2016). Profit is the outcome generated by anentity by conducting their business operations. Cash flow is the residual amount held by businessby paying all expenses and losses from their available cash. A difference of profit and cash flowis created due to changes that take place in its treatment which is given as below:Cash flow forecasting statements will record all the cash transactions which take place inthe business in real time. The increasing cash can generate with higher sales which furtherenhances the profit earned by an enterprise (Wapshott, 2016). The capital is invested by ownersand cash gathered by selling of idle assets held with an entity.The treatment of profit and loss statements is totally different in which all cash inflowsand cash outflows are considered to reflect the true business position of the business entity.Factors which are considered in the estimation of true profit includes depreciation, bad debtswritten off, assets sold at a profit or loss and availability of higher stock of inventory keepingidle in the existing business.In the given case scenario, Wild Frontier Ltd. (WFB) deals in providing services of propertymaintenance by offering buy-to-let. The maintenance of property will include various servicessuch as plumbing, electrical, roofing and general repairs. The repair will target the major areasthat present existing house or property in a new structure to please all its clients.4
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