Cash Flow and Profit Budget Analysis: Westport Leisure Investments

This report presents a detailed budgetary forecast for Westport Leisure Investments Limited, a hotel business in Wales and south-east England. The report focuses on two key components: a cash budget and a profit budget. The cash budget, covering January to June 2020, analyzes cash inflows (sales, food and beverage, rent) and outflows (purchasing, salaries, marketing) to assess the company's liquidity and cash management. The profit budget estimates revenue, expenses, and profit before and after depreciation, providing insights into the company's profitability. The analysis uses the receipt and payment method for the cash budget and includes interpretations of the financial data, highlighting trends and key financial metrics. The report aims to provide a comprehensive financial overview, aiding in decision-making and financial planning for the company.

BUDGETARY
FORECASTS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Cash budget of Westport Leisure Investments Limited ..............................................................1
TASK 2............................................................................................................................................5
Profit budget of Westport Leisure Investments Limited .............................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Budget forecast can be define as the tool of financial management which showcase
quantitative expected estimation of cash inflow and outflow as well as expected monetary
revenue generated from various trade activities. In order to understand the concept of budgetary
forecast in brief manner Westport Leisure Investments Limited has been taken. It is a medium
size business organization which run their business trade in hotel industry and provides various
hotel facilities to their customers in Wales and south-east England. The entity provides various
hospitality services to their customers including food and beverage also provides rental facility .
This report is describe the upcoming forecast cash as well as profit budget of the organization.
Through which manager can understand and analysis activities of generating cash inflow as well
as outflow of given time period. This report also show the profit budget which explain the future
profit estimation of the business entity.
TASK 1
Cash budget of Westport Leisure Investments Limited
Cash budget: It is a measurement technique of financial management which help in
defining the estimated and budgeted cash inflow and outflow estimation of any business entity
for a particular time period generality for a financial year which is started wit January to
December or for many organization it is started with April to march. Cash budget is the
statement of showing the future expected cash related activities of the business organization for
specific time period. The main purpose of preparation of this budget is to identify that whenever
organization has the capacity to run their business organization and able to fulfil their day to day
needs and liabilities as well as requirement of cash for fulling short as well as long term needs of
business organization (Ríos, Guillamón, Benito and Bastida, 2018).
Business organization for preparation of the cash budget use various techniques through which
they are able to formulated their statement of cash budget (DeFranco and Schmidgall, 2020). For
this purpose financial manager use to forecast expected sales revenue from their business
activities as well as they also considered those business activities through which cash outflow
has been generated they considered all the relevant expenses which are necessary for running
business organization (Mukherjee Al Rahahleh and Lane, 2016). It considered all the relent
factors which help in defining the essential cash relevant activities. With the use of business cash
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budget manager able to find out capacity of their organization to assess trade business activities.
With the use of cash budget financial manger can easily interpret that if they do not have relevant
cash capital then they need to raise it by the use of issuing shares or granting loans from financial
institution to run their day to day business activity in an effective manner (Zhou, Mukonza, and
Zvoushe, 2016).
Cash budget play essential part of every Organization whatever it was small or larger or sole
proprietorship as everyone needs to estimate their future cash flow requirement .It is the base of
all the other budget of the entities.
This is essential measurement technique of performance of the business organization as
managing cash and the availability of cash capital the strong position of any business. It is really
essential for maintain liquidity of cash it provide competitive business advantage .It also use to
compare the performance of the organization from past years performance (Mohan and Narwal,
2017).
With the use of cash budget mangers also recognize the timing of shortage of cash and
transaction which require higher availability of cash for run business activities (Goncharenko and
Rassokhina, 2018).
They can control their cash access activities to control wastage spending. By preparation of the
cash budget Westport Leisure Investments Limited will be able to manage their cash capital and
user it only for purposeful business activities. It also useful for the preparation of effective
borrow spending statement for the organization. (Mussari and et.al. 2016).
There will be many methods through which manager of Westport Leisure Investments Limited
use to prepare their budget, it includes, payment and receipt method, profit and loss method, as
well as method of using balance sheet. All theses methods have their own benefits and drawback.
In this report receipt and payment method has been used for the preparation of cash budget. This
cash budget will help the organization to find out there expense regarding proving hotel
facilities, expenses of rent, beverage, food facility , essential items require for competing
marketing needs for run the hospitality business (Reichard and Küchler-Stahn 2019). Manager of
Westport Leisure Investments Limited organization will be able to analysis and understand all
the relent factors that effect their cash business as well as they identify the problems arise and
activities winch require higher cash requirement for the organization. Manager of Westport
Leisure Investments Limited can easily made their future plan regarding expansion of their
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business as well as they understand the effect of various outcomes and relevant business
transactions on business organization. Cash budget helps them to track their January to June
track forecast through which they can prepare other budgets on the basis of their cash budget
(Eulner and Waldbauer,2018).
Cash Budget
January to June
2020
Detail January February March April May June
Opening balance 65000 163477 223756 402135 514564 1457962
Cash sales 130500 125000 140000 145500 148000 178000
Food and beverage 44500 40100 43300 42600 40200 36500
Rent 950 950 950 950 950 950
Commission 25 55 20 15 10 40
Total of cash inflow 240975 331248 310753 414552 592961 2157490
Cash outflow
Purchasing Ven 25000
Invoice pay 75000
Printing and
stationery 2000 2000 2000 2000 2900 2000
Complimentary room
expense 46000
Beverage cost 2000 2000 2000 2000 2000 2000
Contractor paid 8800 22000
Bed bundle cost 700
Salaried staff 36666 36666 36666 36666 36666 36666
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Kitchen porter staff
expense23333 23333 23333 23333 23333 23333
Complimentary
expenses 9600 15400
Lightning 9166 9166 9166 9166 9166 9166
Heating 16250
Marketing expenses 60000
1000 1000 1000 1000 1000 1000
Total of cash outflow 74166 203099 83665 105815 75706 696176
Closing Balance (A-
B) 163477 124817 223756 402135 514564 1457962
INTERPRETATION:
Westport Leisure Investments Limited prepare cash budget to understand future cash
inflow as well as their outflow result. Opening balance of Westport Leisure Investments Limited
in January was 35000 as it is was the closing balance of 2019 December(Ghasemi Bojd and
Koosha, 2018). The overall expected earning of the month January was 240975 , expe4ctered
cash sale of the month would be 1305000 and the expenses generating in the month January
would be 75832, it is analysis that in January Westport Leisure Investments Limited incurred
expe4nse due to purchase to Ven for the use of their business purpose (Megahed Yin and Nezhad
2016, June). Closing balance of January would be 165143 and it is carry forward to February .
In the month of February organization generate their cash inflow from seeking and
providing rent to organization (Giuriato Cepparulo and Barberi, M., 2016).Their total cash
inflow would be 331248, their closing balance will be estimated 126483 and in February
company pay their invoice payment thus they suffers from high cash out flow. The opening
balance of cash in march will be carry forward of the closing balance of February month. It is
identified that company generated 310375 income from their cash generating activities however
the organization incurred expense in the month of march of paying salaries to kitchen, staff,
contractor's money (Яварова, 2016).
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The opening balance of April would be estimated 225422 it was identified that
organization generate 414552 income and their outflow in the month of April is estimated
107481 organization paid marke4ting heating and lighting expenses to run their business
activities. In May it will be estimated that Westport Leisure Investments Limited generated their
revenue 592961 for running their business act5ivties and they need to pay expenses. Thus their
balancing value is estimated 516232 and organization also generating their cash inflows from the
moth June is 2157490 the financial manger identified that organization need to pay expense of
salaries paid to their workers and contract's paid (Themsen, T.N., 2019).
Cash flow help manager of Westport Leisure Investments Limited to estimate budget
cash activities through which they can easily identify and recognize the value of all the essential
activities through which help manager to run business in effective and relevant manner. Cash
flow budget use by the manager to develop understating to the manager regarding the estimated
cash generating values of various business activities (Nikulina, 2019).
TASK 2
Profit budget of Westport Leisure Investments Limited
This is the part of financial management tools it also considered as essential budget of the
organization (Nikitina, Litovskaya and Ponomareva, 2018). Profit budget is a numerical
statement through which organization is able to identify the relevant estimation of revenue as
well as expense generated during specific time period and the amount of estimated profit
business organization will be able to generated by performance relevant effective trade functions.
It help Westport Leisure Investments Limited to understand the value of income as well as profit
generated (Mukherjee Al Rahahleh, and Lane 2016). It also estimate the effect of various
business transaction on profit and also useful in comparing the past period profit with estimated
case well as identify the reason and barriers which may effect on the decreasing value of profit.
Profit budget is prepared by Westport Leisure Investments Limited to determine their future
profit which help in comparing and useful for performance management of the entity. In other
words it is relevant and systematic statement which define the net income generated by
organization in specific future time period.
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Profit Budget
Particular January February March April May June
Sales 175975 166105 184270 189065 189165 215490
- Cost of sale
Expenses 74166 203099 83665 105815 75706 696176
Profit before depreciation 163477 124817 223756 402135 514564 1457962
Deprecation 1666.6 1666.6 1666.6 1666.6 1666.6 1666.6
Profit after depreciation 161810.4 123150.5 222089.4 400468.4 49797.4 1457962
INTERPREATION: From the above calculation it has been analysis that Westport
Leisure Investments Limited able to generated revenue of 175975 in January and its net income
after depreciation would be estimated 161810. This statement showcase that organization also
able to generate 123150 profit in the upcoming moth , the amount of profit decrease in the month
due to higher rate of expense incurred in February . The amount of profit would be increase in
the month of march, April may and June also. the estimated profit will be increase from 161810
to 1457962 (Zhang, Zhang, Fung Rangaiah and Ng, 2018.)To shows that revenue rate of the
organization will be increase if they run their business in effective manner by using attractive
policies and use resource in effective manner..profit budget is use by the manger of Westport
Leisure Investments Limited IN order to recognizes their overall value on monetary benefit .This
also directly impact on the financial performance and also the reason to determine and compare
the financial position of the organization by preparing their profit budget (Peters, Gudergan, and
Booth 2019). Proton of Westport leisure investments limited has been decrease due to
adjustment of depreciation which is essential to identify the effect of value of depreciation assets
on revenue generating activities. The only difference between profit and cash budget is that ,
profit budget consider each and every monetary as well as non monetary business activities to
determine profit however while preparing cash budget, manager does not considers non cash
items as these are not relent while preparing cash budget.
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CONCLUSION
From the above analysis it has been identified that budgetary forecast is reliable
measurement tool use by financial manager to estimate future cash balance ans well as value of
monetary benefit in terms of profit. Cash budget is estimated tabular statement which show the
cash inflow and cash out flow activities of Westport Leisure Investments Limited . It also useful
in planning and making policies and strategies regarding future business activities in order to
increase cash inflow activities . Manager of Westport Leisure Investments Limited use profit
budget through which they identified that their profit rate has been increase by run business
activities in effective manner.
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REFERENCES
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