Detailed Budget Report: Financial Analysis of Hamble Ltd - QH0320

This assignment is a budget report focusing on the financial analysis of Hamble Ltd. Part A includes a cash budget, suggestions for the company's credit strategy, and a discussion of internal and external sources of finance, specifically the issue of shares, along with their respective advantages and disadvantages. Part B presents a detailed ratio analysis of Norwich Ltd and Salford Ltd, covering gross profit margin, operating profit margin, ROCE, asset turnover, current ratio, acid test, inventory days, trade receivables days, trade payables days, working capital cycle, gearing, and interest cover. Part C includes a flexible budget and an analysis of factors that increase or decrease demand for the company's products. The report also includes relevant references to support the analysis and recommendations.

Budget report

Table of Contents
Part A...............................................................................................................................................3
Part B...............................................................................................................................................5
Part C...............................................................................................................................................8
REFERENCES..............................................................................................................................10

Part A
1. Cash Budget
Cash Budget £'000
Apr May Jun Jul Aug Sep
Borrowings 12,570
Opening balance (1,600) (3,180) 90 690 4,890
Cash Sales 600 620 900 500 350 800
Cash collection 11,000 12,350 14,000
Total receipt 600 (980) (2,280) 11,590 13,390 19,690
Less:
Vehicle
replacement 1,250
Other overheads 2,200 2,200 2,200 2,200 2,200 2,200
Purchases 8,000 8,700 6,300 5,200
Total Payment 2,200 2,200 10,200 10,900 8,500 8,650
Cash at the end (1,600) (3,180) (12,480) 690 4,890 11,040
2. Suggestion
Given the organization's financial plan, it is advised that the company stick to its credit strategy.
Because the firm just requires a few months to pay its suppliers, compensation will be received
in two months. This one-month gap wastes money over the course of several months. As a result,
it is suggested that Hamble Limited maintain an acceptable credit plan in which the firm receives
an allowance before the supplier receives an allowance.
3. Sources of finance
Internal sources of finance:

Internal financing can be obtained from a variety of sources, including retained earnings, asset
sales, and borrowing from friends and family.
Advantages
1. It gives the group complete power over them.
2. Work on the circle of control.
3. Most missions' overall cost is reduced.
4. Work on the society's overall worth.
5. Dismantling the effect of external forces on society.
6. In exchange for the money, you can offer some issue regions.
7. There should be no extra values supplied.
Disadvantages
1. It may have a negative impact on your job finance strategy.
2. To be effective, it needs comprehensive assessments.
3. The organization may have less service allowances.
4. He must maintain control.
5. Project completion may need profitability.
6. It may force certain organizations to operate on a shoestring budget.
7. Dissect some publicly available information.
4. Issue of shares
Issue of shares
Advantages
The fact that your company works with a wide range of physical accounting game plans is
maybe the biggest benefit of employing external sources of money. Instead of stripping your

lucrative businesses or enticing customers in from crucial places, there are now a variety of
financial tools that can help you capitalize.
Similarly, because you may distribute huge costs and make them more sensible, you can utilize
outside funds to profit from any area of your organization, as many products are not available
due to usage restrictions. As a result, external record stores can aid in the acquisition of new
equipment, the purchase of property, the maintenance of imbalanced payments, the promotion of
internal collateral efforts, maximum supply, emergency identification, and much more (Lewis,
2018).
Similarly, depending on what you pick, there are a variety of inexpensive options for a variety of
financial conditions. You might nevertheless utilize external financing sources to deal with your
association if you have a self-employed financial appraisal or a corporate fund.
On the other hand, while it is an important tool for promoting one's business, there are also
advantages to employing other sources of funding. Because payments, organizational expenses
per money lender, and guaranteed charges are all included in the regular use of company money,
sustaining a firm this way will cost more than using your own cash (Heald and Hodges, 2020).
Disadvantages
Furthermore, while abnormal financial valuation may not allow owner to shutdown the business,
it will have a direct impact on your interest rate through comprehension. In general, the lower
your FICO score, the more difficult it is to comprehend, and vice versa. That's why, before
applying for a business account, you should run a character check with one of the UK's major
credit bureaus (Equifax, Experian, or Trans Union) to see whether there are any issues.
Especially since banks always do thorough background checks, such as if you have any new or
past CCJs, emergency allowance letters, dubious obligations (such as Mastercard duty), and
establish a payback schedule (Alkaabi and Nobanee, 2019).
Part B
1.
a. Gross Profit Margin Norwich Ltd Salford Ltd
£'000 £'000

A Gross Profit 2,300.00 2,220.00
B Net Sales 8,320.00 11,250.00
Gross profit margin (A/B) 27.64% 19.73%
b. Operating Profit Margin Norwich Ltd Salford Ltd
A Operating Profit 1,252.00 685.00
B Net Sales 8,320.00 11,250.00
Operating Profit Margin (A/B) 15.05% 6.09%
c. ROCE Norwich Ltd Salford Ltd
A Operating Profit 1,252.00 685.00
B Capital Employed: 1,995.00 3,395.00
Total Assets 2,522.00 4,625.00
Less: Current Liabilities 527.00 1,230.00
ROCE (A/B) 62.76% 20.18%
d. Asset Turnover Norwich Ltd Salford Ltd
A Net Sales 8,320.00 11,250.00
B Total Assets 2,522.00 4,625.00
Asset Turnover (A/B) 3.30 2.43
e. Current Ratio Norwich Ltd Salford Ltd
A Current Assets 2,020.00 4,427.00
B Current Liabilities 527.00 1,230.00
Current Ratio (A/B) 3.83 3.60
f. Acid Test Norwich Ltd Salford Ltd
A Quick Assets 730.00 1,990.00
B Current Liabilities

527.00 1,230.00
Acid Test Raito (A/B) 1.39 1.62
g. Inventory Days Norwich Ltd Salford Ltd
A Inventory 1,290.00 2,437.00
B COGS 6,020.00 9,030.00
Inventory Days (A/B * 365) 78.21 98.51
h. Trade receivables days Norwich Ltd Salford Ltd
A Trade receivables 730.00 1,990.00
B Credit Sales 8,320.00 11,250.00
Trade receivables days (A/B *
365) 32.03 64.56
i. Trade payables days Norwich Ltd Salford Ltd
A Trade payables 430.00 850.00
B COGS 6,020.00 9,030.00
Trade payables days (A/B *
365) 26.07 34.36
j. Working capital cycle Norwich Ltd Salford Ltd
A Inventory turnover 78.21 98.51
B Trade receivables days 32.03 64.56
C Trade payables days 26.07 34.36
Working capital cycle (A+B-C) 84.17 128.71
k. Gearing Norwich Ltd Salford Ltd
A Debt 592.00 2,680.00
B Equity 1,930.00 1,945.00
Gearing ratio (A/B) 30.67% 137.79%

l. Interest Cover Norwich Ltd Salford Ltd
A Operating profit 1,252.00 685.00
B Interest expenses 20.00 70.00
Interest Coverage ratio (A/B) 62.60 9.79
Part C
Budget
Sales (units) 250,000
£/unit £000'
Sales revenue 13.00 3250
Variable produce costs (3.50) -875
Variable production
overheads (0.60) -150
Fixed production costs -700
Fixed administration costs -1160
Profit 365
Flexible budget
£/unit £000s £000s
Budget 200 300
Sales revenue 13.00 2,600.00 3,900.00
Variable produce costs (3.50) (700.00) (1,050.00)
Variable production
overheads (0.60) (120.00) (180.00)
Fixed production costs (700.00) (700.00)
Fixed administration costs (1,160.00) (1,160.00)

Profit (80.00) 810.00
Working
2. Factors
Factors increase in demand:
1. Decrease in price of the product.
2. Increase in the quality of the product at constant price (Srithongrung, Yusuf and Kriz,
2021).
Factors decrease in demand:
1. Increase in price of the product.
2. Decrease in sources of income of the client (Takhtaishahi, Mohammadipour and
Hematfar, 2017).

REFERENCES
Alkaabi, H. and Nobanee, H., 2019. A study on financial management in promoting sustainable
business practices & development. Available at SSRN 3472415.
Heald, D. and Hodges, R., 2020. The accounting, budgeting and fiscal impact of COVID-19 on
the United Kingdom. Journal of Public Budgeting, Accounting & Financial
Management.
Lewis, C. W., 2018. The Field of Public Budgeting and Financial Management, 1789–2004.
In Handbook of Public Administration (pp. 151-225). Routledge.
Srithongrung, A., Yusuf, J. E. W. and Kriz, K. A., 2021. A systematic public capital
management and budgeting process. In Research Anthology on Preparing School
Administrators to Lead Quality Education Programs (pp. 598-619). IGI Global.
Takhtaishahi, M., Mohammadipour, R. and Hematfar, M., 2017. Strategic Financial
Management Using Identifying Necessary Factors for Implementing Performance Based
Budgeting System in Islamic Azad University.