Business Finance: Cash Budgeting, Stakeholders and Profit Analysis

This report provides a comprehensive overview of key business finance concepts, starting with the construction and application of a cash budget to manage cash flows effectively. It delves into the accounting equation, explaining its importance in maintaining financial balance and accuracy within an organization, further highlighting its components—assets, liabilities, and owner's equity. The report also discusses the advantages of listing company shares on a stock exchange, such as enhanced visibility and access to capital, and identifies significant stakeholders for a large listed company like Marks & Spencer, emphasizing the importance of balancing their diverse interests. Lastly, it differentiates between profit and cash flow, clarifying why profit is not always a reliable indicator of cash balances and underscoring the importance of both for long-term financial stability. Desklib offers this report and many other resources for students seeking assistance with their studies.

Business Finance
Table of Contents

Introduction .....................................................................................................................................3
Task – 1............................................................................................................................................3
Task- 2.............................................................................................................................................4
2.1 Explain what is an accounting equation and why it always work in a business
organization? Provide an example along with the explanation...................................................4
2.2. What benefits might a company gain from having its shares listed on a stock exchange?..5
2.3 Who do you think might be considered to be stakeholders in a large listed company like
Marks and Spenser? ...................................................................................................................6
2.4 Is the profit that a business makes a reliable indicator of its cash balances? What are the
differences between Profit and Cash?.........................................................................................7
Conclusion.......................................................................................................................................8
References........................................................................................................................................9
Books & Journals .......................................................................................................................9

Introduction
Business finance can be defined as an effective tool that majorly helps in dealing with the
financial transactions of the business organization. In order to develop an effective and efficient
financial system in an organization it is significantly important to record all the expenditures and
incomes carefully in the books of accounts by using different tools. Also, it helps in achieving
the objectives of the organization in a better and effective manner. In relation to the report, the
tool of cash budget is used to record the cash transactions. Also, the major benefits of listing the
shares on the digital platform of stock exchange are explained and who can be the major
stakeholders of the company Marks & Spencer are also elaborated. In addition, the
differentiation between profit and cash in a business organization are also effectively assessed.
Task – 1
Cash budget can be referred to an analytical tool which is basically used by many organization in
order to record different types of cash flows (Malik and Kanwal, 2018). These transactions are
basically the result of the business operations. A cash budget can be prepared weekly or monthly
based on the requirements of the company.
Cash Budget ending 31st March, 2022
Particulars January February March
Receipts
Capital
Cash Sales
Credit sales
10000
1260
2940
-
960
2240
-
885
2065
TOTAL (A) 11260 960 885
Payments
Drawings
Purchases (Personal)
Purchases
Motor Vehicle
Cash Purchases
800
499
720
-
2800
800
-
-
-
1500
800
-
-
3200
750

Electricity
Telephone cost
Fuel Cost
-
120
-
-
120
-
285
120
65
TOTAL(B) 4939 2420 5220
NET RECIEPTS (A-B) 6321 -1460 -3535
Balance brought forward
Balance carried forward 6321 -1460 -3535
Task- 2
2.1 Explain what is an accounting equation and why it always work in a business organization?
Provide an example along with the explanation.
An accounting equation is one of the most common tool that is used by a business
organization. It is used in order to develop a balance sheet. It includes the equation of total of all
the assets and liabilities along with the shareholders equity (Mills, 2018). It is used in order to
comply with the standards of maintaining the double book entry keeping system. Accounting
equation is used as the key tool in the double entry book keeping system. For the purpose of
preparing the accounting equation the equation mentioned below can be used by the business
organization:
Liabilities = Assets – Owner’s Equity Owner’s Equity = Assets – Liabilities
the formula which is mentioned above includes different component which can be named as
assets, liabilities and owners equity. The formula is made with an objective to ascertain the
financial position of the business organization.
Importance of Accounting Equation:
one of the main and the best advantage of using the statement of accounting equation is that it
directly helps in verifying the accuracy levels of the books of accounts while performing the
double entry book keeping. It is important to use an accounting equation by huge number of
organization because the profitability of the company can be ascertained effectively (Cui, Jo and
Na, 2018). One more major component is management of money that can also be done in a

particular proper format. This brings on high level of efficiency while maintaining the records of
the business transactions. It is also recommended by the global standards that while managing
the finances of an business entity it is highly important the system of account is completely
capable of developing the financial statements along with all the facts and figures. As accounting
equation is a basically a balancing tool it helps in recording all the business transaction in the
statement of accounting equation in order to ascertain the balance sheet. Therefore accounting
equation helps in avoiding many calculative errors and omissions in the organization's book of
accounts.
2.2. What benefits might a company gain from having its shares listed on a stock exchange?
Stock exchange can be simply defined as a digital platform which is used by different
organization to raise capital by selling out its financial securities. It is a centralised as well as
digital platform used by huge number of organization (Beji, Yousfi, Loukil and Omri, 2021). It is
majorly concerned with the purchasing and selling of the financial securities to the general public
with an objective to raise finances for the company. There are different advantages that can be
achieved by listing of financial securities of the company on the stock exchange and they are
mentioned beneath:
 Raising funds: One of the most common and important objective of listing the shares on
the stock exchange is that companies get an opportunity to raise finances without
approaching any lender or creditor. Listing is an important tool for raining the finances
and achieving the financial goals of the company efficiently. Also, once the method of
listing is used by the company to raise they no longer need to go for external help to
achieve the business goals.
 Effective Corporate Performance: Stock exchange activities includes various important
and strict policies that are required for performing different financial activities (Baker,
Kilincarslan and Arsal, 2018). It is considered that when any illegal practice happens in
the financial procedures it may directly result into the suspension of the rights of trading
on the stock exchange.
 Enhanced Visibility: Once the shares are listed on the stock exchange it helps in
increasing the visibility of the organization to a greater level so that the company can
achieve high level of recognition in the competitive marketplace.

 Financial performance disclosure: Listing comes with the responsibility of sharing the
financial information of the company in keeping the records of books of accounts clean
and fraud free.
 Access to capital Growth: the company helps in achieving the capital growth as well.
Whenever the company wants to raise the finance for the company, listing the shares on
the stock exchange will help in enhancing the credibility levels considerably.
2.3 Who do you think might be considered to be stakeholders in a large listed company like
Marks and Spenser?
Stakeholders can be referred to an individual or a business entity which are having
interest in the business organization directly and indirectly with some concern (Gaitán, Herrera-
Echeverri and Pablo, 2018). It significantly impacts on the process of decision making of the
company along with its business operations. The major stakeholders who can become the part of
the large organization namely Marks & Spencer are mentioned below:
 Employees: they are the key stakeholders of the company who performs all the business
operations. It is important to provide employees with enough pay and peaceful working
conditions so that the employees become satisfied with their work life majorly. In context
to Marks and Spencer, they are providing good working conditions to the employees of
the company and also takes care of building a strong level of employee engagement in
the business organization.
 Government: It is one of the external party of the business organization that may affect
the business organization in different ways. Government sets the laws and regulations
that plays a major role in governing the business activities of the company so that the
organization can perform its activities under all the legal compliances framework. In
context to Marks & Spencer, it specially conducts meetings with the government
institutions along with conferences so that different issues can be resolved efficiently.
 Customers: They are considered one of the most important and essential stakeholders in
of the business organization. They are considered as the actual buyers of the products and
services of the business entity (Alareeni, 2018). It is the moral responsibility of the
company to sell the required products or services for the customers at reasonable rates.
In context to Marks & Spencer, they are regularly closely monitoring the movement of
the products and services in accordance to the process of selling happening into the

market. They are regularly considering the needs and preferences of the customers with
the help of Retail Customer Services.
 Suppliers: They are also considered as the important stakeholder of the company as they
helps in providing raw materials to the business organization so that the end products can
be developed and sold in the target customers (Barclay and Smith, 2020). In relation to
Marks & Spencer, as it is a large form of company it requires secured and fair contracts
respectively.
 Investors & Shareholders: They can be defined as an individual or a group who are
responsible for buying the shares of the company and investing them in the business
whenever they are required by the business organization (Hodge, 2018). They are majorly
prioritized towards the extensive growth of the business organization which are having
the motive of making high amount of profits to succeed in the long run.
 Local communities: It is the major source of providing customer to the business
organization which majorly helps in establishing the process of sales for the company.
The existence of local community plays a key role in defining the place where the outlet
should be situated so that there is an enhancement in the customer engagement. In
context to Marks & Spencer, it is majorly focussing and maintaining on developing warm
and peaceful relations in accordance with the local communities with the help of several
meetings and conferences.
2.4 Is the profit that a business makes a reliable indicator of its cash balances? What are the
differences between Profit and Cash?
Profit and cash flows are considered as two major components that plays an important role
achieving success in long run. An organization requires both of the components in order to
develop a stable financial position of the company. It is seen that an organization being profitable
may not compulsorily have adequate cash flows (Cohen, 2018). While on the other hand, having
adequate cash flows does not determine that the organization is having profits. Therefore, it can
be said that profit is not a reliable indicator of adequate cash flows of a business organization.
The differentiation between the profit and cash are mentioned below in the table:
Profit Cash

 Profit can be defined as the money
which left from the total revenues
earned by the company.
 Profits can not be spent on different
business operation expenses.
 There are high chances of profits
getting manipulated.
 Shareholder do not care about the
amount of profits earned by the
company.
 It can be defined as the money that
keeps coming in and out of the business
in the form of cash inflows and
outflows.
 Cash can be spent on the different
business operation expenses.
 While, there are less chances of
manipulating the cash inflows and
outflows.
 Shareholders are more concerned about
the cash flows as the payment of
dividends are made in cash.
Conclusion
From the above report it can be analysed that it is highly important to build cash budget
as they help in managing the financial transactions in an effective manner. Also the tool of
accounting equation helps in balancing the assets and liabilities of the business in an effective
manner. In addition to this, the various impacts of profits and cash flows must be considered to
analyse the financial status of the company.

References
Books & Journals
Malik, M. S. and Kanwal, L., 2018. Impact of corporate social responsibility disclosure on
financial performance: case study of listed pharmaceutical firms of Pakistan. Journal of
Business Ethics, 150(1), pp.69-78.
Mills, K. G., 2018. Fintech, small business & the American dream: How technology is
transforming lending and shaping a new era of small business opportunity. Springer
International Publishing.
Cui, J., Jo, H. and Na, H., 2018. Does corporate social responsibility affect information
asymmetry?. Journal of Business Ethics, 148(3), pp.549-572.
Beji, R., Yousfi, O., Loukil, N. and Omri, A., 2021. Board diversity and corporate social
responsibility: Empirical evidence from France. Journal of Business Ethics, 173(1),
pp.133-155.
Gaitán, S., Herrera-Echeverri, H. and Pablo, E., 2018. How corporate governance affects
productivity in civil-law business environments: Evidence from Latin America. Global
Finance Journal, 37, pp.173-185.
Alareeni, B., 2018. Does corporate governance influence earnings management in listed
companies in Bahrain bourse?. Journal of Asia Business Studies.
Barclay, M. J. and Smith, C., 2020. The capital structure puzzle: Another look at the
evidence. Journal of Applied Corporate Finance, 32(1), pp.80-91.
Cohen, R. B., 2018. The new international division of labor, multinational corporations and
urban hierarchy (pp. 287-315). Routledge.
Hodge, G. A., 2018. Privatization: An international review of performance. Routledge.
Baker, H. K., Kilincarslan, E. and Arsal, A.H., 2018. Dividend policy in Turkey: Survey
evidence from Borsa Istanbul firms. Global Finance Journal, 35, pp.43-57.
Harjoto, M .A. and Rossi, F., 2019. Religiosity, female directors, and corporate social
responsibility for Italian listed companies. Journal of Business Research, 95, pp.338-346.
(Malik and Kanwal, 2018)(Mills, 2018)(Cui, Jo and Na, 2018)(Beji, Yousfi, Loukil and Omri,
2021)(Gaitán, Herrera-Echeverri and Pablo, 2018)(Alareeni, 2018)(Barclay and Smith, 2020)
(Cohen, 2018)(Hodge, 2018)(Baker, Kilincarslan and Arsal, 2018)(Harjoto and Rossi, 2019)