Business Finance Report: Trend Ltd Cash Flow and Financial Results

This report delves into the core concepts of business finance, focusing on cash flow, profit, working capital, and their interrelationships. The report analyzes the financial performance of Trend Ltd, examining its profit margins, account receivables, payables, and inventory management. It includes a detailed analysis of how changes in working capital affect cash flow and recommends strategies to improve cash flow and working capital management, such as managing inventory, utilizing up-to-date financial information, negotiating with vendors, and meeting financial obligations. Furthermore, the report prepares a monthly cash budget for Thorne Estates Limited, forecasting cash inflows and outflows for the period of January to April 2021. The analysis of the cash budget provides key observations and recommendations for improving the company's financial planning and liquidity.

Business
Finance

Table of Contents
Executive Summary.........................................................................................................................1
TASK 1 ...........................................................................................................................................1
(I) Explain:.......................................................................................................................................1
(a) What is Profit and Cash flow and how cash flow and profit are different ............................1
(b) What is Working Capital, Receivables, Inventory and account Payables.............................2
(c) Changes in Working Capital will affect Cash flow................................................................2
(ii) Apply concepts in how firm can affect their financial results..............................................3
(iii) Recommend what steps should be taken to improve firm cash flow and working capital
management.................................................................................................................................3
Executive Summary.........................................................................................................................4
TASK 2............................................................................................................................................4
1. Prepare a monthly cash budget for the FOUR months from 1st Jan to 30 April 2021............4
2. Key observations or recommendations of Thorne Estates Limited.........................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

Executive Summary
The term business finance includes those business activities which are related to funds
and concerned with acquisition and conservation of capital funds to meet their financial needs in
an organisation (Alber, 2020). For raising funds and managed their funds through designing, and
operations control activities for financial manager who is usually made their decisions by related
to finance committee. In this report, it is generally talking about Trend Ltd which manufacture
for gym clothing and footwear systems. It is more important for business because it helps to day
today transactions and flow of cash for daily basis managing and monitoring all necessary
transaction which are related to business.
TASK 1
(I) Explain:
(a) What is Profit and Cash flow and how cash flow and profit are different
Profit: It is the income which is distributed to owner after all costs which they are paid.
These includes labour, materials and interest and it is amount which have gained to sell their
product should be more than cost for price of product (Appiah‐Otoo and Song, 2020). It is
rewards for firm owners so that they can invest in any business enterprise. In case of Trend Ltd,
it is important for business because profits can impact firm whether it is secure financing from
bank and it would be attract many investors to fund their operations for help to growing their
organisations. Firm cannot survive without profit in business.
Cash flow: It is a statement that is cash inflow and outflow of business and they
determine how much cash firm should be managed to pay their long term debts that concise
amount of cash and cash equivalents. It is influenced by increase or decrease money from
business, institution which is generated cash for a specific time period. With relation to Trend
Ltd, it will helps to settle debts and reinvest its business to return money for shareholders and
pay expenditure and debts that provide a future financial outcomes.
Difference between cash flow and profit:
Profit Cash flow
It is the amount which is deducted after paying
all expenditures. Making more money than
It is a statement which determine how much
cash inflow and outflow of business to identify

spend in its business or investing anything. long term operations of business.
It includes three types of profits are gross
profit, operating profit and net profit.
Cash flow also include three types of activities
such as operating activities, investing activities
and financing activities.
Profit is more productive of firms success While cash flow is more important to keep
their day to day business transactions.
(b) What is Working Capital, Receivables, Inventory and account Payables
Working capital: It is the difference between current assets such as inventory,
receivables, cash and current liabilities are creditors, account payables (Bell, Bryman and
Harley, 2018). It measures firm liquidity position and short term financial position in business
enterprise. In case of Trend Ltd, it is important for firm because it measures firm ability to pay
their short term debts.
Account receivables: It is a proceed payment which firms will receive from it clients
who have purchased from good and services. It will be shown in balance sheet and amount
which is owned by customers on credit basis. With relation to Trend Ltd, it will be helpful for
investors to gain a better sense of firm overall efficiency in business enterprise.
Inventory: It defines goods and services which are deliver to customers at right place at
a right time. This defines that goods are available for sale and raw materials used to produce
goods. In case of Trend Ltd, it can saves money and allows to fulfil their customer needs in a
proper time.
Account payables: When firm purchases of goods and services on credit and amount
will firm will pay its suppliers. These amounts related to vendors and it is shown in balance sheet
of firm. In case of Trend Ltd, it is important for business because it can takes charge of paying
bills on a particular timely basis and ensures that all invoices are tracked and paid properly.
(c) Changes in Working Capital will affect Cash flow
Changes in working capital affect cash flow if there is firm working capital should
reduced then the cash portion of current assets also decreased but current liabilities would remain
unchanged (Chavali and Rosario, 2018). A positive working capital defined that cash inflow
should be measured and it is based on negative working capital which defined that there is a firm

which has to spent more cash to be brought for manage their working capital. When firm has
more current assets than current liabilities means that firm has fully cover their short term
liabilities.
(ii) Apply concepts in how firm can affect their financial results
Profit: Trend Ltd previous year turnover is £300 million in surplus nature and operating
profit of this enterprise is £60 million in previous year which will indicate that there is enough
amount of money in cash so that they will produce and utilize in next year (Dafe, 2019).
Cash flow: In case of Trend Ltd, related to cash flow there is no information and outflow
of firm only shows £300 million turnover and it will effect directly in firm because if there is
high cash flow in firm then there is firm invest more in organizations and pay their long term
debts.
Account receivables: It means they key customers of this firm are Tkechers Ltd and
Sadidas Ltd, which will be helpful top enhance their profits for an future period. It will effect
Trend Ltd because so that they improve their profits in business enterprise through Tkechers and
Sadidas Ltd.
Account payables: In case of account payables, Trend Ltd firm customers are Tkechers
and Sadidas Ltd are £10 million is owned to previous year and Sadidas Ltd £1.5 million is owned
in next year in 2019.
Inventory: It is form of raw materials, finished goods and work in progress but with
context to Trend Ltd, inventories related to this firm are gym clothing and footwear. Stock of this
firm can affect their money because they should invest in their products such as gym clothing an
footwear and it will affect their direct policy which will impact on gross and net profit of this
firm.
(iii) Recommend what steps should be taken to improve firm cash flow and working capital
management
As per analysis of above information, in case of trend Ltd they should improve their cash
flow through working capital management various recommendations are as mentioned below:
Manage inventory: It is most important aspects of working capital that they affect to
improve their cash flow through working capital which include raw materials and finished goods
and make sure that there is all finished goods are sold as much as possible and cut all products or
services so that they are not performing (Goodell, 2019). In case of Trend Ltd, to manage their

inventory in firm are also affect working capital because inventory consist of many items which
are available for sale and used in production process.
Up to date financial information are used: It is important that financial information are
up to date because financial statements of this firm and quickly should be calculated ratios on
cyclic basis. With relation to Trend Ltd, it is helpful for firm for which enable to gives a clear
and true picture of financial position and provide improvements in cash flows.
Choose vendors who offer discounts: Work with vendors who offer new discounts and
various deals which will be helpful for firm (Nugroho, Nugraha and Badawi, 2020). To
establish and maintain their good relationship will not only help to get special offers and
discounts but also help to earn vendors trust. It will help finances to maintain their good
relationship with customers for their long way efficiency. When these time comes which faces
problems but also save some expenses that could help to pay their debts and grow their working
capital.
Meet financial obligations: According to this, to manage their debts can also affect their
working capital and late payments are not allowed in this firm. To ensure that there is a all debt
obligations are met on time and it ensures all payments are paid on a timely basis. If there is late
payment there are some penalties are become habit due to mismanagement of debts. It can help
manage their dues that payments are time to avoid delays and payments.
Executive Summary
Thorne Estates limited which operates in real estates who sell their properties in different
different customers. For this assessment it includes to prepare cash budget only for four months.
From cash budget of Trend limited firm should be concise only for four month cash budget to be
changed which will be necessary to field in an effectively manner. They should apply some
approaches to increase their cash budget in proper and efficient manner.
TASK 2
1. Prepare a monthly cash budget for the FOUR months from 1st Jan to 30 April 2021
Cash budget: The term cash budget is an estimation of firm's cash inputs and cash
outputs for a particular period of time which can be weekly, monthly and quarterly (Pak, 2019).
It predicts future period for cash receipts from various different sources, cash pay out and
generally develop their position for budget period. It is generally determine that whether it is has

sufficient cash to uphold their operations or given a specific period of time frame. In case of
Throne limited, it is important for business that allows firm to establish their credit for extend
their customers without having a problem of liquidity position (World Bank, 2019). It helps to
avoid their shortage of cash in firm during high level period in which firm can have a high
number of expenditure. If there is any problems of cash in firm then they have maintain and
prepare a cash budget which will help to maintain a liquidity position and pay their expenses and
debts on this cash budget.
Cash budget of Thorne estates limited:
Particulars January February March April
(A) Receipts
Cash sales fees 18000 27000 45000 54000
Credit sales fees 36000 36000 54000 90000
Disposal of vehicles 20000
Total receipts (A) 54000 63000 99000 164000
(B) Payments
Salary 26250 26250 26250 26250
Bonuses 6300 12600
Variable expenses 9000 13500 22500 27000
Rent/Rates - - - -
Fixed overheads 4300 4300 4300 4300
Tax liability 95800
Interest charges 3000
Total Payments (B) 39550 44050 62350 165950
Net cash flow (A-B) 14450 18950 36650 1950
Opening balance 40000 25550 6600 30050

Closing balance -25550 -6600 30050 28100
APPENDIX:
Working notes:
Month December January February March April
Units sold 10 10 15 25 30
Sales value 1800 1800 2700 4500 5400
Cash fee at 1% 18000 18000 27000 45000 54000
Cash fee at 2% 36000 36000 54000 90000 108000
Variable cost
at 0.5%
9000 13500 22500 27000
Monthly salary cost= (35000*9)/12=26250
Bonus for March= (25*20)*140*9=6300
Bonus for April= (30*20)*140*9=12600
Analysis:
From the above analysis, it has been understood that cash budget of Trend limited firm
should be recognize that there is a cash receipts which should decreased month by month and the
main things is that cash budget should be replaced or decreased overall at end of month (Ullah,
2019). For month of January, they should be recognise that cash flow of this firm are £63450
which was decreased in this month but at month of February cash budget is £32450 are in
upcoming month. After that future month of cash flow will increased is £55750 for the month of
April and again it was decreased is £36250 so the conclusion is cash flow is fluctuating in every
month and these made conflicts regarding this issues on time and it will major problem in this
firm that upcoming years are should be a problem of lack of working capital and unrealistic
transactions are increase day by day.
2. Key observations or recommendations of Thorne Estates Limited
From the analysis, it can be recommend that Thorne estates limited can highly increasing
their cash flow because in the month of February cash flow is decreasing and in April month

which has impact to less number of cash activities are arises (Van Velthoven, De Haan and
Sturm, 2019). For this company expense are high range which will majorly impact in cash flow
and also impact of working capital. Various suggestions and recommendations which need to be
applied with relation to Thorne estates limited are as described below:
 It can decrease their expenses which will improve to major cash flow in organisation.
With context to trend limited, they should be adopt much more money as compare to any
other alternative which will lead to cash and commission in an business enterprise.
 They can consist various payments options for clients that will be provided by firm and it
will be easier for customers that they can manage their online payment transfers through
debit cards, credit cards, google pay and many more options are there.
 It helps to reduce their revenue in firm which will also lead to improve their cash flow
position. For this, they can also increase their some other alternatives for customers to
increase their market schemes. If they do not applied this techniques then customer are
more attract towards this firm and lead to increase their number of options for cash
receipts.
 Firstly, they should communicate those customers who are permanent in this firm and
able to influence their customer in terms of their invoices and cash paid invoices should
be regularly (Vasileiou, 2021). To maintain and build their customer relationships will be
effect on positive in firm which sill impact directly in cash flow.
 To improve cash flow in this firm which should try gain their fees where cash are
enhanced. If suddenly firm are increased their prices then it may be a chance of
customers are decreased day by day. So they should maintain a cash flow in respect to
customers then they are more attract towards their firm.
 The last way to recognise their cash flow that will managing inventory in business and
helps to change their full time resources it also helps to move their inventory form one
place to another. If there is increase their stock which defines that stock are should be
unsold in cash outflow and if cash outflow are increases then they should maintain their
buying level of inventory which help to maximise their profits.
CONCLUSION
From the above information, it has been concluded that business finance helps to raising
and managing funds for control their operations to measure a structure of firm and determine

how much firm can mange their funds and allowed to meet their customer needs. In this report,
various topic are covers such as profit and cash flow, working capital, inventory, account
receivables and account payables and how working capital affect cash flow, cash budget for four
years and various recommendations which related to Thorne Estate limited.

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