Business Finance Report: Bright Lawns Ltd. and Boatworld Plc Analysis

This report is a detailed analysis of business finance, focusing on the financial performance and management of two companies: Bright Lawns Ltd. and Boatworld Plc. Part A examines Bright Lawns Ltd., exploring financial statements (profit, cash flow, working capital, receivables, payables, and inventory), analyzing their impact on cash flow, and offering recommendations for financial improvement. Part B shifts focus to Boatworld Plc, discussing budget formation, traditional and alternative budgeting methods, and their implications for the company's expansion plans in Germany and the Netherlands. The report covers key financial concepts, provides practical applications, and offers strategic recommendations for effective financial management. The report covers the impact of working capital and its modification on cash flow. The report also presents the understanding of budget formation with both traditional and alternative budget methods.

Business Finance

Table of Contents
PART A...........................................................................................................................................1
Executive summary......................................................................................................................1
i) Different Elements of financial statements..............................................................................1
ii) Implementation of concepts....................................................................................................3
iii) Recommendation....................................................................................................................4
PART B............................................................................................................................................5
Executive summary......................................................................................................................5
i) Understating of budget formation............................................................................................5
ii) Implanting of methods and cost management.........................................................................7
iii) Evaluation of traditional or alternative budgetary system for company................................8
REFERENCERS .............................................................................................................................9

PART A
Executive summary
Business financing can be described as the capital that companies have used to work out
the entire operating tasks in a specific period of time. In case if it is absent, it can impact the
quality of company procedures (Antony and Bhattacharyya, 2010). The first part is focused on
the service of Bright Lawns Ltd. that is located in Birmingham and Manchester, London. The
report covers meaning of profit, cash flow, working capital, payables and inventory. In addition,
concepts and impact of working capital analysed has been analysed.
i) Different Elements of financial statements.
Profit: This can be characterized as an organization's monetary gain by supplying certain
goods and services to customers. The accounting practitioners in a company are expected to
exclude expenses from the amount earned from sale events before estimating profit figures.
Every revenue generated after the costs have been deducted is referred to as income level for a
year. It is primarily evaluated by investors in order to measure a firm's performance and profit-
generating potential.
Cash flow: In order to facilitate the mechanism of conducting out operating operations,
the amount of financial resources that are exchanged into and out of a business is known as total
cash flow. In other terms, the method where money moves from a company to perform specific
task and the total money received from these activities is known as cash flow (Dees, 2016). At
the conclusion of every year, this cash flow statements are written by considering the real
accounts.
Comparison
Cash flow Profit
Shareholders use this statement to calculate the
firm's profitability.
Shareholders must examine the capacity of the
company to make profits in respective period.
This is determined by subtracting total cash
flows from actual inflows to asses monetary
funds.
In order to assess the profit margin accountant
consider each cost and subtract from sales
figure.
Proper and authentic cash flow statement is In order to extract the actual profit figures
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prepared by the accountant to record the total
inflows and outflows.
income statement are maintained in regular
interval.
This account's is nominal existence which is
depended upon the concept of accrual.
This is a real account which is mainly
compiled according to the grounds of receipts
and compensation statements.
b) Importance of inventory, working capital, receivable and payables
In business context, there are number of terminology and elements of financial statements
that is needed to be consider while maintaining annual reports of an organisation. Some of theses
are discussed below:
Working capital: This could be described as the resources or capital that companies are
using to manage and run day-to-day operations. In certain terms, the gap among current assets
and liabilities is specified as working capital (Duan and Xiong, 2015). this is eventually used by
highest level manager in companies to describe the financial stability available at a specific
period of time. It is known as the working capital portion. With the assistance of working capital
shareholders ascertain the financing specifications that are required to systematically carry
crucial operations of company. There have been four major components that need to be centred
to handle and organize current assets and liabilities such as financial assets, inventory, payable
accounts and accounts receivable.
Receivables: If companies give credit to vendors as well as other businesses, then the
outstanding balance will be remembered as receivables. This is reported in the organization's
assets although the residual earnings are classified as assets. company use to issue invoices that
are further sent to respective customer for the main aim to make them aware about making debts
payment within agreed time period. This also help company to make stronger customer base by
strengthening credit policies and increasing the income level in an accounting year (Ferrando,
Popov and Udell, 2017).
Inventory: In companies, the total amount of stock maintained for the aim to conduct
selling activity on specific time is known as inventory that directly increase the productivity and
profitability. The companies which use to produce specific goods for making customer satisfied
maintain a significant level of inventory so that production keeps on going. In respective firm
inventory are basically hold in three form such as raw material, goods in transit and finished
goods.
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Payables: in case if an organisation purchase any products or raw material on credit basis
from respective vendors or other investors, the sum needed to be charged over a certain number
of years is reported in payable reports. In certain terms, the money owed by the firms could be
described as payables for a period (Hassan and Sirajo, 2017). The total amount that is required to
be repaid by company in upcoming time is mainly reported on liabilities section as this is
consider to be the outstanding responsibility which is needed to be decreased in specific time.
c) Modification in working capital that has an affect on cash flow
The difference in working capital have a both positive as well as negative impact on the
figures of cash flow within specific year. This mainly display the raise in cash inflows that is
because of increase in current assets such as cash and other equivalents, receivable and
inventory. In addition, the adverse working capital display the reduction in cash flows that states
that current liabilities are increasing year by year. It is noticed that adverse total of working
capital keeps on reducing because of continuous receiving of payment from outstanding debtors.
ii) Implementation of concepts
Profit and loss situation: The Brightlawns basically execute 3 factories in respective
part of London. The company use to produce essential fittings parts and valves for garden home
that is trending in Birmingham and Manchester. In the particular financial year the overall
profitability of company is good as the total profit is £5 million for previous year. In future time
manager might take different opportunities depending upon the current profitability that will
definitely increase the efficiency of making profit in competitive world.
Cash flow position: From the yearly cash flow of Brigthlawns it is observed that due to
raise in profit margin and future investment there will be a direct impact on cash inflows and
outflows (Hirshleifer, 2015). As from the statements, it is observed that there are two customer
from where company make trade and total debts increase by £2 million because of huge
investment and expansion of business. BLL has often specialized in a company producing the
decorative garden waterfalls and fountains. It incorporated 30% of the projected firm's income.
This spending lowers capital inflows, but equity support would boost the firm's cash inflows by £
2 million. Thus, it is observed that the current actions positive signals in context making profit in
nearby future for BLL.
Impact upon working capital management: It is stated that even after maintaining the
overall profit margin and good market position there are few financial problems that are faced by
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BLL. The company owed 1.5 million GBP that is related with large order make by C&P in
previous year and the ongoing problem with BricoFrance of about 2 million GBP relevant t
consignment made in 2017. It is estimate that in case if problem gets resolved then the net
working capital would definitely reduced by 3.5 million GBP because of payment received.
Other than that, the completed inventory content at the London site is another component which
may lead to operating capital increase as inventory level is necessary to maintain the degree of
working capital and regain the damages from different conflicts.
iii) Recommendation
From the above case scenario, it is observed that BLL is considering the different
elements of business thus manager are required to pay authentic attention on these factors and
make valuable steps. The very first step of action is related with distribution of funds that are
raised from debt financing. It is essential to analyse whether or not the equity expense is regained
by business transactions of company. The yields from initial investment of decorative garden
waterfalls and water processes should be redistributed or used in daily business in quick-term
investments. The overall investment in share capital is around 10 million GBP from which
company is needed to give 8 million GBP as an advance fee as exclusive structure due to which
there would be decrease in the working capital and profit margin.
It is also observed that total finished stock at London factory might be used in context to
overcome the indemnity occurs because of different challenges (Lambrecht, 2017). Furthermore,
the respective firm is capable to correlate with the management team in order to meet the
necessary working capital. It is necessary to establish a new proposal on cash flow management
where the optimal level of inventory as well as the period of receiving payment from the
company will be at the first point. In addition, the stock management technique should be used in
order to settle the dispute with C&P at London site. Company also do not make any kind of
pressure or put any extra pressure on customer to make payment.
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PART B
Executive summary
Business finance is a wider concept that covers the total money and resources used within
an organisation in order to attain the desired results in meaningful time period. In this part of
report different valuable components of alternative budgeting methods for Boatworld Plc is
discussed. The company is planning to open a new place of business in Germany and
Netherlands.
i) Understating of budget formation
This can be described as a business plan developed by companies in order to be able to
carry out all operating operations properly (Leitch, Welter and Henry, 2018). Management may
forecast potential profits and costs with the aid of this. It is produced primarily on an annual,
semi-annual and quarterly basis. In every company budgets are mainly prepared for several
purpose such as:
1. Making an effective control on total expenses over period to increase income level.
2. In order to ensure that company have sufficient and required resources to execute
different valuable operation in future.
a) Traditional budgeting approaches:
These are the crucial financial plans where the financial data from the last year is actually
used as a guide for make more accurate and effective current year budgets. Its main approach is
discussed below:
Incremental budget
It is a conventional budgeting method where statistics from the preceding year are used to
construct the current year's financial plan. It's primary purpose is related with determining the
actual financial performance of company in current year. Thus, the actual amount that are
reported in these budgets involves alteration for several factors like rising of selling price,
inflation, trade policy etc. Its main pros and cons are discussed below:
Pros: With the support of this budget, disputes between various departments can be
avoided even though the company takes a flexible approach (Nicholls, Paton and Emerson,
2015). This is consider to be an easy way of financial planning to plan and grasp the activity
which takes less time and help to lower the overall business costs.
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Cons: This method of budgeting includes total cost that do not have any kind of
justification that further leads to problem in order to examine the overall performance.
b) Alternative budget methods:
Rolling budgets: This kind of financial plan are regularly updated on the basis of the
current financial position of company in competitive environment. By implementing this
methods manager can proper and appropriate decision are made by management team like in
Boat world Plc to improve the company financial stability. This budget gives the detail and
current information relevant to present modification that are made within company expenses
figures to increase income level.
Pros: This budget holds up-to-date information, it allows businesses and administrators
to become more sensitive to unexpected reporting shifts (Peris-Ortiz and Sahut, 2015). This plan
has a strong degree of flexibility since it can be revised at a certain time.
Cons: One of its main weak point is that it would be time consuming and costly method
of budgeting due to lack of administrators attention financial plan are made over and over again.
Zero based budget: It is a kind of budget which basically start with Zero and do not
consider any information from previous budget as manager make new effective financial plan
every year. ZBB includes expenses and income from different activities and proper justification
of each elements in order to determine the actual profit margin for that respective year. With the
support of this budget manage of Boat world plc estimate total income and expenses required
and proper justification of these revenue and expenditures. Its main strength and weaknesses are
discussed below:
Pros: This directs executives to explain all the sales and expenditures that benefit the
company in assessing the overall performance in the current financial year. This method is also
used in increase the efficiency of distribution of resources to increase profit of company.
Cons: This is not used for lengthy-term purposes as it requires year-on-year data. The
formulation method is very linear as managers can face uncertainty when reporting in the
accounts unused or deferred numbers.
Activity based budget: This is consider to be effective budgeting method which help
companies like Boat World Pc to establish the specific budget as per the activity requirement in
order to reduce the expenses (Ramiah and Gregoriou, 2015). The primary intention of this budget
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is to record the several operation of company and analyse the total funds required to run these
activities in particular time frame to reach the desired goals.
Pros: This can enable administrators accurately calculate costs per system and also aid
in making decisions related with improving sales strategy, management and quality approaches
that could be routinely updated for better results.
Cons: The method of collecting and preparing documents is difficult and time consuming
as the examples needed to gather data aren't always available to create decisions.
ii) Implanting of methods and cost management
Boat World Plc administration has been using traditional financial planning for the past
couple of years but now onwards they might use multiple alternative methods to prepare the
company's future cost control (Turner, 2017). Such as, by implementing traditional method in
respective firm would be beneficial while opening new place of business at Netherlands and
Germany. As manager can easily asses the previous year budget and estimate the total expenses
and income by these expansion. It would be supportive in deciding the rental rate for boat as they
can easily set the best possible package for customer those are willing to rent a boat for holidays.
Through alternate budgeting approaches, the manager of the company should make a
financial plan. Such as a zero-based strategy where a new proposal with a null value could be
created that aid in increasing profit margin. This is consider to be an effective method for Boat
World Plc as it support manager to make strategy according to the new place of business which
company actually planning to expand.
Boat World Plc can use activity-based plan to distribute money for various tasks like
advertising, sales etc. With the aid of this strategy, company will also be capable of performing
its business operation in a structured manner as manage can evaluate expenses in advance related
to entire business activity.
In addition rolling method of budgeting is basically used to make time to time update in
the expenses figures to reach the desired income level so that proper results can be identified. By
implementing this method in context of expanding business manager can make following
alteration within records as per the market circumstances of both countries. This would also
assist the manager to manage the prices efficiently in future, as these budgets adjusts as per
changing trends of market conditions (Ramiah and Gregoriou, 2015).
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iii) Evaluation of traditional or alternative budgetary system for company.
It is observed that effectiveness of alternative and conventional budgetary method is
primarily depended on the business activity nature. It is recognized that companies that maintain
an organizational process that are repeated or fixed existence use conventional monetary
strategy. A clear and conservative existence of income and expense is the main reason to use the
classical budgetary structure (Turner, 2017). In addition the alternative budget method give
more wider financial stability of preparing appropriate budget that further support in analysing
the estimate of figures to business structure.
The alternate budgetary model will be the most reasonable option for Boat World Plc
because of its possible future. Since working at a new place, it is quite essential for an
organization to ensure that it pays much attention to various components of business conditions
like trade policies, governance rules and regulation etc. The different budgeting techniques such
as ZBB and rolling are consider to be more beneficial that directly support in several manners.
Such as it help in estimating the total expenses required to open new outlets in two different
countries and total income generated from these location. The main benefit of these budget is
that they are volatile in nature so that any kind of modification as per the business requirement
can be done. It is also observed that bugs could be removed out with the assistance of alternative
budgets before the organization undergoes more major changes in nearby future. This is due to
main characteristic of these budget as it do not use previous years information.
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REFERENCERS
Books and Journals:
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organizational excellence
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Finance Librarianship. 21(1). pp.49-59.
Duan, L. and Xiong, Y., 2015. Big data analytics and business analytics. Journal of
Management Analytics. 2(1). pp.1-21.
Ferrando, A., Popov, A. and Udell, G. F., 2017. Sovereign stress and SMEs’ access to finance:
Evidence from the ECB's SAFE survey. Journal of Banking & Finance. 81. pp.65-80.
Hassan, M. K. and Sirajo, A., 2017. A review of empirical Islamic finance literature. Available
at SSRN 2980486.
Hirshleifer, D., 2015. Behavioral finance. Annual Review of Financial Economics. 7. pp.133-
159.
Lambrecht, M. B., 2017. The Basel II rating: ensuring access to finance for your business.
Routledge.
Leitch, C., Welter, F. and Henry, C., 2018. Women entrepreneurs’ financing revisited: taking
stock and looking forward: New perspectives on women entrepreneurs and finance.
Nicholls, A., Paton, R. and Emerson, J. eds., 2015. Social finance. Oxford University Press.
Peris-Ortiz, M. and Sahut, J. M., 2015. New challenges in entrepreneurship and finance.
Switzerland: Springer. https://doi. Org/10.1007/978-3-319-08888-4.
Ramiah, V. and Gregoriou, G. N. eds., 2015. Handbook of environmental and sustainable
finance. Academic Press.
Turner, A., 2017. Between debt and the devil: Money, credit, and fixing global finance.
Princeton University Press.
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