Financial Analysis and Performance Report: Uber Tools Limited

This report provides a detailed analysis of the business finance of Uber Tools Limited. It begins with an introduction to business finance and its importance, followed by an examination of the differences between profit and cash flow, along with the concepts of working capital, inventory, receivables, and payables, and their impact on cash flow. The report then explores concepts to improve financial performance, including accrual and matching concepts, and proposes steps to enhance the company's cash flow. Part 2 focuses on the elements of financial performance, such as assets, liabilities, equities, and revenues, and includes a ratio analysis for the years 2009, 2010, and 2011. The report concludes with an analysis and recommendations to assess the financial performance of the business.

BUSINESS FINANCE

Table of Contents
INTRODUCTION...........................................................................................................................3
PART 1. ..........................................................................................................................................3
(a) Profit and cash-flow and their difference..............................................................................3
(b) Meaning of working capital, inventory, receivables and payables........................................4
(c) Affect of working capital on the cash flow............................................................................5
(ii) Concepts which are needed to improve financial performance.............................................5
(iii) Steps to improve company's cash flow.................................................................................6
PART 2............................................................................................................................................6
(a) Elements of financial performance........................................................................................6
(b) Ratio of each year..................................................................................................................7
(c) Result to consider the reason of changes in ratios................................................................8
(ii) Analyse and recommendation to assess the financial performance of business. ..................9
CONCLUSION...........................................................................................................................10
REFRENCES ................................................................................................................................11
Books and journals:...................................................................................................................11
......................................................................................................................................................11

INTRODUCTION
Business finance is a key to run all the business activities. Every business requires the
money to implement all the policies and strategies (Aktas, Croci and Petmezas, 2015). Basically,
its simple mean is the money which is required to run the business. In addition, finance is
necessary to buy assets and other equipments for the companies. To understand in detail about
the business finance, Uber tools limited company is selected which is involved in the production
of power tools.
The project report consist the information about the profits and working capital and its
impact on the cash flows. In addition, it includes the various ratios to measure the financial
performance.
PART 1.
(a) Profit and cash-flow and their difference.
Profit- Profit is the difference between the money earned and money expand as expense.
Generally, profit is considered as the advantage for the company. It is important to do expanse
for earn the profit because without expenses it is impossible to get profit. In addition, if expenses
are more then earned money than it will not be considered as profit. This is tool to measure the
value of all the effort and expenses of the company.
Cash flow- It is a kind of statement which describes the increase and decrease in the cash
for a particular time period. Basically, it analyse the virtual movement of cash which changes. It
is prepared for a particular time period which may be monthly, quarterly or yearly. Cash inflow
indicates the positive situation for the company, on the other hand cash outflow refers the
negative sign of company.
Comparison between profit and cash flow
Basis Profit Cash flow
Mean It is excess of income over expenses. This is the statement of describing
changes in cash for a particular time
period.
Objective Main objective of calculating profit
is to compare the expenses with
Its objective to help managers for
making future decisions by providing

money earned. information about the cash out and
inflow.
Calculation Profits are calculated by simple
formulas and formates.
While it is calculated by three major
activities like operating activities,
investment activities and financing
activities.
Profit and cash flow both are the different terms but have the same link with cash (Atrill,
McLaney and Harvey, 2014). Uber tools limited company calculates the profits and prepares
cash flow statements to control the financial activities. Like they have the profit of £ 400
millions in a particular year.
(b) Meaning of working capital, inventory, receivables and payables.
Working capital- It is a kind of capital which is required by a business to operate day to
day activities. This is related to the liquidity or cash that is needed to run daily operations.
Eventually, it is the difference between the current assets and current liabilities. This capital
measures the short term financial health of an organisation.
Receivables- It may be defined as a process in which a company claims to collect future
cash, assets etc. The receivables can be classified as follows: Account receivables, notes
receivables. Herein, accounts receivables means collection of money from those customers who
purchase goods and services on the credit. Notes receivables means claim of money on the issue
of any promissory note. It refers the credit allowed to a customer by issuing a note or document.
Inventory- This is a kind of term which is refers as the goods which includes at various
stage of production which is as follows: raw material, work in progress and finished goods.
Herein, raw material is a kind of good which is going to be used to production. It is a basic
material. Work in progress includes a kind of good which is in the process to complete and
finished good is the last product which is useable. All those stages of goods considered as the
inventory for companies.
Payables- It means when a company makes the transaction on the credit and amount will
be paid in future then it will be considered as the payables. Payables are like a liability for the
company which is needed to pay on time to avoid the interest. This type of transactions are done
when a company don't have enough cash (Mylonas, Afzal and Attrill, 2014).

(c) Affect of working capital on the cash flow.
Working capital is the difference between current assets and current liabilities which is
needed to run day to day activities. Eventually, working capital affects the working capital in
many ways. It is important for the companies to manage the working capital favourable because
it is related to the cash and cash flow also consists all the information which is regarding to the
cash. Majorly, working capital effects to the cash flow from operating activities and it can be
understand by following:
 If working capital is positive (current assets are more in compare to current liabilities)
then it would affect the cash flow positively. Due to this there would be cash inflow
which shows cash is increasing in compare cash decreasing.
 On the other hand, if working capital is negative( amount of current liabilities exceeds
the amount of current assets) then it would affect the cash flow negatively. With the
effect of this there would be cash outflow which means company is expanding too much
cash in compare to earn.
(ii) Concepts which are needed to improve financial performance.
Accounting concepts brings transparency in the financial transaction which result in the
improved financial performance. These concepts provides a set of rules and regulation to enter
the financial data. Uber tools limited use following accounting concept to improve their financial
performance:
Accrual concept- This concept stats that all the income and expenses are needed to be
identified for that accounting period in which these occurs. According to this concept income
must be recognized for that period in which it earned as well as expenses should also recorded
for the period in which it incurred. This accounting concept is much similar to the matching
concept. In addition it has its own importance like it brings accuracy in the transactions,
improves the performance. Uber tools limited apply this concept in the identification of income
and expenses.
Matching concept- This accounting system is based on the accrual concept. According
to this concept all the incomes must be matched with the those expenses which occurs in earning
that income(Dostál, P, 2013). For example income earned in month of March but received in

April but it would be considered as the income of march. Uber tools limited use this concept to
match the income and expenses for a particular time period (Melville and Sindhwani, 2017).
(iii) Steps to improve company's cash flow.
Cash flow is very important for all the companies because it consist all the information
about the company's cash related activities. It analyse that which activities are bringing cash and
which ones are reducing. Generally, cash inflow is the favourable condition because it shows
that cash is increasing. On the other hand, cash out flow is considered as unfavourable situation
because it indicates that cash is going out frequently in compare to increasing. Uber tools limited
prepares cash flow which shows the cash related activities. It necessary to improve the cash flow
of the company which can show cash inflow and for this company is needed following
suggestions:
Improve inventory- It is necessary for the companies to manage the inventory system
effectively because in the absence of this there can be waste of cash. For example Uber tools
limited may have those tools in their warehouses which are not demanded by the customers, in
this condition they need not to produce those products to save the cash.
Pay suppliers less- Suppliers are those who provides material for production and takes
cash in return. It is important for companies to make good relationship with suppliers so that
they can provide some discount. Uber tools limited should try to pay suppliers at lower price and
for this they need to evaluate the alternatives of suppliers.
Increase in pricing- High pricing may reduce sell but after some time period it will
increase in the sell as well as brings the more cash in the organisation to improve the cash flow.
Uber tools limited should keep the price of tools high to earn more cash and to improve cash
flow.
PART 2.
(a) Elements of financial performance.
Financial performance is measured with the help of financial statements. There are
various kind of elements which is helpful in the measurement of performance. Some of elements
are following like assets, liabilities, expenses, revenues etc. Uber tools limited applies a range of
elements of financial performance which are following:

Assets- These are the first element of the financial performance. It is important for the
companies to increase in the assets because it shows the good financial condition. There are two
kind of assets: fixed and current. Both of assets take place in the balance sheet. Uber tools
limited has both of assets. In year of 2009, their fixed assets were £ 454000 and current assets
were £ 65000.
Liabilities- These are just like the debt amount which a company is needed to pay their
creditors. Current liabilities and non current liabilities are the part of liabilities. These should be
less then to the assets. Uber tools limited consists various liabilities in their balance sheet. In
2009, they have £ 29000 current liabilities which increased in further year. In addition they have
non current liabilities of £ 186000 in 2009 and increasing in upcoming years. This is not a good
sign for the company.
Equities- Equities are the difference between assets and liabilities. If assets are
increasing and liabilities are stable then equities will increase (Melville, 2017). These are placed
in the financial statements. Uber tool limited use this elements in improving the financial
performance because more equities brings improvement in the financial growth. They have
constant equity share capital of £ 187000 in year 2009, 2010 and 2011.
Revenues- These are the important elements of the financial performance. Revenue is the
money which a company through sales or other earning activities. Increased revenues help the
company in improving the financial performance. The above company use this as an important
element for performance improvement.
(b) Ratio of each year.
Name of ratio Formula 2009 2010 2011
Sales growth ratio (Current- last year
sale)/ last year
sale*100
- 10.00% 15.90%
Gross profit
margin ratio
Gross profit/ total
sales revenue*
100
63.88% 63.63% 59.25%

Operating profit
ratio
Operating income
/ total revenue
30 25.5 10.67
Gearing ratio (Long+ short term
debt+ bank
overdrafts) /
shareholders
equity
61.18 72.62 115.4
Interest coverage
ratio
Earning before
interest and tax/
interest expenses
12 8.41 3.6
Return on equity
ratio
Net income/
shareholders
equity
25.98 20.74 7.55
Return on capital
employed ratio
Net operating
profit/ current
assets- liabilities
28.8 47.86 101.95
Liquidity ratio Current assets/
current liabilities
2.24 2.37 0.92
(c) Result to consider the reason of changes in ratios.
 Sales growth ratio- This ratio indicates the amount by which company's sales growth
increases. It stats the relationship between difference of current and last year sale. Uber
tools limited company has nothing in 2009 because that was basic year but in 2010 they
have 10 % ratio which increased in next year and became 15.90% in 2011.
 Gross profit margin ratio- It is a kind of ratio which shows the relation between gross
profit and total sales revenue (Andaya and Andaya, 2016). Increasing in this ratio,
considered as the positive sign. The above company has 63.88% ratio in 2009 which
decreased by a low percentage and become 63.63%. It decreased by large gape in 2011
and became 59.25%.

 Operating profit margin ratio- This ratio describes the link between operating income
and total revenue. Uber tools company has variable amounts in this ratio. In 2009, this
ratio was 30 which decreased in next year and became 25.5 in 2010. In 2011 this ratio of
company decreased by huge criteria and became just 10.67. It is not a good condition for
the company.
 Gearing ratio- It is a kind of ratio of which shows relation between owned capital and
borrowed capital. Company's ratio is increasing rapidly. In 2009, they have 61.18 which
increased and became 72.62 in 2010 and in 2011 it became 115.4.
 Interest coverage ratio- This ratio determines a company's ability to pay interest
expenses on outstanding debt. It is calculated by dividing earning before interest and tax
by interest expenses. Uber tool limited company has the ratio of three years. In 2009,
they have 12 which decreased in next year and became 8.41 in 2010. In addition, this
decreased in next year too and became just 3.6.
 Return on equity ratio- It is calculated by dividing net income by shareholders equity.
The above company has this ratio of 25.98 which decreased in the next year and became
20.74 but in the 2011, it decreased by huge gape and became just 7.55.
 Return on capital employed ratio- This ratio is helpful in measurement of company's
ability to generate profit from its capital employed. Uber tools limited company has this
ratio of 28.8 in 2009 which became 47.86 in 2010. It increased in next year too and
became 101.95 in 2011.
 Liquidity ratio- This ratio shows that how much current assets and organisation have to
pay current liabilities. Uber limited company has the 2.24 ratio in 2009 which increased
by some margin and became 2.37 in 2010. In 2011, it decrease and became 0.92.
(ii) Analyse and recommendation to assess the financial performance of business.
Financial performance of a business is always to be strong and competitive. For this
purpose it is needed that companies should manage all the things in an effective manner. Uber
tool limited company's performance is up and down in three year which are 2009, 2010 and 2011
(Watson, Broderick and Armon, 2016). Their different ratios are increasing and decreasing in
each years. Like their liquidity ratios increase in 2010 but soon after decreased in the next year
and became just 0.37 which is very low. Same as gross profit of company was sufficient in 2009

but it decreased by some margin which was acceptable but in 2011, it decreased by huge criteria
and became just 59.25%.
In addition, their return on capital ratio was decreased continuously which was not bearable for
company because in basic year 2009, they have 25.98 but in 2011 it was just of 7.55. On the
other hand their some ratios increased significantly.
Recommendation-
From above analysis the company needs following recommendation to improve the
financial performance:
 Company is needed to use appropriate financial statements which can show true and
transparent financial condition to the company and as well as to the external users.
 They should try to match the current assets with current liabilities so that they can
become able to pay the debts.
 It is needed for company to ensure about the availability of finance which is important
for implementation of activities.
CONCLUSION
From above project report it has been concluded that business finance is very important
to put the plan into the action. In addition, companies should understand the difference between
the profits and cash flows because both are different terms. There is a link between the working
capital and cash flows because working capital can impact the cash flow in both way negatively
and positively. So proper working capital management is necessary. Apart from these, there are
many elements of financial performance which have their own impact on the financial
performance.

REFRENCES
Books and journals:
Aktas, N., Croci, E. and Petmezas, D., 2015. Is working capital management value-enhancing?
Evidence from firm performance and investments. Journal of Corporate Finance. 30.
pp.98-113.
Andaya, B. W. and Andaya, L. Y., 2016. A history of Malaysia. Macmillan International Higher
Education.
Atrill, P., McLaney, E. and Harvey, D., 2014. Accounting: An Introduction, 6/E (Vol. 6).
Pearson Higher Education AU.
Melville, H., 2017. Pierre: Or, The Ambiguities (International Student Edition)(Norton Critical
Editions). WW Norton & Company.
Melville, P. and Sindhwani, V., 2017. Recommender systems. Encyclopedia of Machine
Learning and Data Mining, pp.1056-1066.
Mylonas, P., Afzal, Z. and Attrill, D.C., 2014. A clinical audit of denture cleanliness in general
dental practice undertaken in the West Midlands. British dental journal. 217(5). p.231.
Watson, L., Broderick, C. and Armon, M. P., 2016. Thrombolysis for acute deep vein
thrombosis. Cochrane Database of Systematic Reviews, (11).