Business Finance Report: Financial Analysis of Trend Limited and TEL

This report provides a comprehensive analysis of business finance, focusing on Trend Limited and Throne Estate Limited (TEL). Task 1 delves into the concepts of profit, cash flow, working capital, receivables, payables, and inventory, examining their impact on financial results. It describes Trend...Read More

BUSINESS FINANCE

TABLE OF CONTENTS
TASK 1.......................................................................................................................................................3
1...............................................................................................................................................................3
2 Describing the way of managing Trend Limited and its impact on financial results.............................4
3. Analyzing methods that can be utilized for better working capital management and cash flow..........5
TASK 2.......................................................................................................................................................6
Preparing cash budget from 1st Jan to 30 April for throne Estate............................................................6
Methods for improving TEL performance...............................................................................................9
REFERENCES..........................................................................................................................................11

TASK 1
1.
a) Explaining Profit and cash flow
Profit refers to an income earned from business activities. It is difference between
revenue generated and expenditure spent to obtain income. Profit is end outcome for which
business conducts operational activities. Financial gain is main motive of conducting business
practices by organization (Le and Ngo, 2020). Trend limited earned 60 million operating profit
from manufacturing gym clothing and footwear.
Cash flow is movement of money from which is basically related with payments. It is
mainly concerned with future payments that an organization is expected to pay. In addition to
this, this decides liquidity of particular company which helps firm to get sustainable position in
market.
Profits Cash flow (CF)
It is an accounting concepts which is fictional This is can be obtained from funds sources to
attain liquidity
Profit that tell that Trend limited is going in
right direction or not
CF indicates company has enough resources to
generate profit.
Company can evaluate through profitability
that it can survive for longer period.
Demise of organization can be known through
analysis regarding lack cash flow
This is can be measured in terms of amount Cash flow is measured in time value form.
b) Describing working Capital (WC), receivables, payables and inventory
WC is available amount within in company for establishing daily operational activities. It
can be obtained by deducting current liabilities from assets. Operational efficiency can be
assessed by determining working capital (Le, 2019). In addition to this, it helps Trend limited to
know its financial position in industry. Proper policies should be formulated by TL to ascertain
capability for paying its short term obligation sin effectual manner.

Receivables are debt owned to company by buyers of TL products. This arises due to
company’s policy of selling goods on the basis of credit which is recorded in balance sheet as it
is treated as liquid assets (Gigli and Mariani, 2018). This can be utilized by organization for
meeting shorter obligations. It may result in bad debt so it is suggested to Trend Limited to
follow up customers for avoid risk.
Payables are those payments that are remaining to pay for purchasing inputs and other material on
credit. It is money owned by business to its suppliers which is shown on liability side of balance sheet
(Carey, Knowles and Towers-Clark, 2017). Trend limited has increased to £ 95 millions that are an
indicator of higher liability which need to pay on time for sustaining good creditworthiness in market.
Inventory term is widely used to represent stock of inputs, work in progress material, and output.
It aids Trend limited to meet market demand and supply in appropriate way (Singh and Verma,
2018).TL ahs good amount of stock in its London warehouse that can be utilized by organization for
sustaining in sector . Company requires analyzing market condition for proper inventory management as
inappropriateness in this can lead to rise in cost.
c) Explaining impact of working capital on cash flow
WC heavily impact cash flow of enterprise as it is determined through examining difference
between current assets and liability. Cash as being part of current assets highly get affected from
movement in working capital (Anton and Afloarei Nucu, 2021). Changes in current assets and liability
in same proposition does not influence WC of Trend Limited. Purchasing of assets reduced liquidity in
company which also result in declination of CF and working capital &vice versa (Berikol and Killi,
2021).
Trend limited WC would not be affected in case of purchasing inventory with cash as both are
included in current assets. Insufficiency of working capital may reduce operating capacity of TL
due to reduction in cash position of company. Trend Limited has agreed to pay £5 millions for
supply of goods in turn impacts cash position which highly influence working capital of
enterprise. There are several methods that can give guidance to TL for managing WC.
2 Describing the way of managing Trend Limited and its impact on financial results
TL manufactures footwear and gym clothes which supplies goods to various biggest
brands. The company’s shares is owned by Arpha and four family members. Proposition in

which company is owned by its shareholders is 30 & 70% hold by Arpha and four family
members respectively. Profitability earned by organization for last is £60 million for last year. It
is indicator of unsatisfactory figure from view points of stakeholders due to rise in debt. This is
due to improper handling of cost related with production activities (Kocsis and et.al., 2021).
Company need to enhance its profitability margin by removing irrelevant expenses.
Two key corporate customers of TL are Sadidas and Tkechers ltd. With respect to this,
company has obligation to pay £10 million to its one of customers. It shows inappropriateness in
handling business liquidate position. Arpha suggests company to improve its way of conducting
operational practices. There is dispute as well which can decrease its creditworthiness by
spoiling image in market. Customers are attracted to those products whose firm who contributes
in fulfilling its interest of stakeholders (Boisjoly and et.al., 2020).
Company has managed its inventory in London warehouses for acquiring stable
production process. It has also been indulged in legal action due to supplying sub standard goods
to Sadidas.
This has impacted its efficiency of meeting payment to suppliers which are threatening
legal actions. These are some reasons that can be identified which impacts its working capital
and ultimately financial position in market (Faccia and Mosteanu, 2019). The managing criteria
followed by business for gaining growth require some improvements.
3. Analyzing methods that can be utilized for better working capital management and cash flow
For obtaining desire financial health company need to focus on several aspects which
influence it’s WC. There are various techniques which provides guidance to organization for
acquiring, maintaining and monitoring cash which are as follows:
 It is recommended to Trend limited to formulate working capital management
policies for ensuring that its financial resources are appropriately managed and
allocated to all departments. In addition to this, it will lead to obtain efficiency in
dealing with its expenditure.
 This is suggested to company for adopt adequate inventory management so that
firm can reduce cost related warehouses. Meeting obligation can be done with
help of reducing expenses. It becomes crucial for organization to pay its liabilities

on time to save its reputation among similar firms therefore making essential plan
regarding inventory management can save company to maintain creditworthiness.
 Trend limited can take action of choosing those vendors who provide discount on
bulk quantity. It will provide assistance in declining carriage inward and outward
expenses for improving cash flow and therefore working capital in qualitative
manner (Jares and French, 2019.). Cash flow crunch can be decline to some extent
by focusing on these factors which contribute in smooth functioning of TL. For
this purpose, maintaining good employee and suppliers relationships for gaining
economic scale.
 Analyzing fixed and available cost through adopting appropriate budgetary plan
may guide business in opportunity in eliminating irrelevant expenses so that more
liquidity for working capital can be derived. With respect to plans regarding
payments related to dividend, interest, tax, administration, operating expenses, etc
can be managed effectively.
 Short term financing by analyzing all available options for TL will be helpful in
company’s effective cash management for obtaining better working capital
conditions (Ríos and et.al., 2018). It is related with planning & controlling all
financial resources which can be exerted with help of in time management for
overcoming changing circumstances.
 Using up to date financial information for modifying adopted technique regarding
monitoring company’s cash flow can assist company in getting desire outcome.
Constantly keeping an eye on WC position can give opportunity to avoid
unnecessary debt obtaining situation for managing operational activities of
business.
TASK 2
Preparing cash budget from 1st Jan to 30 April for throne Estate
Cash Budget (CB) refers to a financial technique that is utilized by organization in order
to estimate company’s payment and receipts. In addition to this, it helps organization to develop
proper financial strategy for managing and allocating its funds related activities. It would be
beneficial for the Throne Estate Limited to develop cash budget for deciding its profit margin

and other decision regarding expenditure. This is usually prepared for monthly, weekly and
yearly depending upon need of business (What is cash budget? 2021). Throne Estate Limited
(TEL) can determine cash flow in and out to assess its liquidity position by analyzing the balance
remaining at the end of period. The following is CB of TEL:
Particulars Jan Feb Mar April
Cash balance at the beginning
of month -40000
146300
0
389320
0 8137700
Receipt
Sales
180000
0
270000
0
450000
0 5400000
income from fees 18000 63000 99000 144000
income from vehicle 20000
Total receipts
177800
0
422600
0
849220
0
1370170
0
Payments
employee salary 315000 315000 315000 315000
Bonus to employees 700 1400
Variable expenses 9000 13500 22500 27000
Fixed expenses 4300 4300 4300 4300
Interest 12000
outstanding tax liability 95800
Total Cash balance at the end
of Month
£14630
00
£38932
00
£81377
00
£132582
00
TEL can get deepest insight into prevailing financial situation in firm through cash
budget. There are several advantages that firm obtain through preparing, maintain an devaluating
CB. The decision regarding short goal accomplishment can be easily determined with usage of
specified budgetary method. In addition to this, it is prepared for both short as well long term.
Investment for larger duration can be accessed through defining budgets components in
segregating manner so that return on income by cost incurring on capital can be differentiated
through this tool.
Throne Estate Limited will be able to estimate proper planning for allocating its funds to
all departments in turn sustainable growth and profitability can be derived from this. Deficits and

surplus identification aids company to examine need for modification regarding its current
business structure and procedures (DeFranco and Schmidgall, 2017). Variations occurring in
each decided period can give insights related to lacking area that need improvement. With
respect to this, unforeseen circumstances can be predicted and actions for overcoming can be
planned by TEL.
Maintaining adequate cash balance for adoption of changing circumstance in market
forces can be dealt easily from getting guidance through cash budget. Contingencies margin
helps TEL to get an idea regarding requirement of upcoming funds and price strategies so that
need can be fulfilled in right manner (DeFranco and Schmidgall, 2017). Technique for valuing
inventory by checking company’s present performance can be done in order to have significant
competitive advantages. Evaluating company’s performance through estimating task costing give
standard mark for comparing actual outcomes. Dividend policy by analyzing cash balance
remaining at the end of each period provide assistance to firm for attaining appropriate approach
in satisfying stakeholders need. Sound consistent stability in profitability and market position is
supported by CB.
Basis for longer and shorter planning program for expansion, marketing strategies,
operational practices, etc can be assessed by analyzing cash flow in out. Coordination in all
functional areas with help of liquidate statement can be exerted (Cull, 2017). Identification of
lacking resources and for tackling the issues arising which is served as barrier for growth can be
examined through cash position of company. Security, sustainability, profitability, etc are fully
dependent on company’s ability of generating and monitoring payments and receipts (Messer,
2020). Furthermore, method for credit paying and dealing with debtor through proper estimation
of company’s various departments requirement may be analyzed by comparing current position
with previous period for Throne Estate Limited’s performance estimation.
From the above calculated cash budget it can be interpreted that TEL prepares CB for
every month. The shown CB has been formulated for the period of Jan to April. The company
deals in Estate business which sells property and have 9 employees for having smooth
functioning. The cash balance at the beginning of Jan is -40000 and moving in upward trend
which has reached 8137700 at the month of April. This is an indicator of good growing
performance of TEL. Course of action taken to attain this figures are modification of existing

policy related to fees receiving. Company allows its customer to pay fees in efficient manner that
serves ease to them such as 1 % in sale month and remaining in next period. With respect to this,
it help organization to build good relation with customers.
Throne Estate Limited has got clear view with respect to its payment practices. It
comprises salary to employees plus bonus on terms & condition, variable and fixed expenditures,
interest and outstanding liabilities. The structure followed to encourage workers to performing
through utilizing full potential is providing bonus opportunities. It helps to accomplish both
personal as well firm objectives (Manjunath and Praveen, 2020). TEL has paid its outstanding
liability in month of April so it should take measure to developed suitable approach for making
debts payment on time.
Cash balance remaining at the end of each decided period is increasing with changing time.
Balance in month of January to April are 1463000, 3893200, 8137700 and £13258200 respectively
that indicates stable liquidate position of TEL. Moreover, preparing cash budget for getting
knowledge regarding company performance make able to derive lacking areas and strengths
through which TEL can improve practices for acquiring competitive advantages. From the
above computation it can be estimated that Throne Estate Limited has occurred at sustainable
growth and development stage where it has maintained proper strategies for making balance
between receipts and payments. Balance is rising in each decided period.
Methods for improving TEL performance
Throne Estate Limited should implement such strategies that aid business to achieve its financial
as well organizational goals. There are various approaches that business can sue to obtain
sustainable firm growth & development. TEL can utilize below mentioned techniques for
improving prevailing situation:
 It is advisable to TEL to use professionalism while interpreting the prepared CB for
getting accurate condition. It will give assistance in comparing current position with
competitors to determine changing situation that can influence smooth functioning of
business practices.
 Embracing transparency provides positive overview of firm which helps stakeholders to
take interest in company’s activities. Once shareholders are convinced and gain

trustworthiness through viewing accurate liquidate performance they can evaluate and
make decisions for investing into business (10 ways to improve budgeting and
forecasting, 2021). Attracting customers and shareholders are crucial activity for
marinating favorable cash balance and ensuring availability of funds for carrying forward
business practices.
 Adapting Collaborative working condition encourages employees to perform through
giving full potential can lead organization to move towards success. With providing
bonus more reward plans should be developed in order to encourage employees’ efforts
for acquiring higher sales.
 Evaluating plans for expansion and takeover through capital appraisal technique can also
make TEL to attain competitive benefits in industry. With respect to this, it will enable
firm to get more trustable creditworthiness image for desirable results.
 It is recommended to TEL to evaluate its current cash budget strategy for recognizing
lacking areas in implementing modifications. Being clear regarding future goals as well
facilitate Throne Estate to select right path for moving forward towards success.
 For achieving better cash balance regarding managing its day activities in respect to deal
with issues arising. This can be exerted with help of variance analysis in turn current
performance can be compared with previous for improving existing cash condition. In
addition to this, evaluating employees’ performance gives assurance to Throne Estate
limited for taking suitable actions.

REFERENCES
Books and Journals
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Firm Profitability: Empirical Evidence from the Polish Listed
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Profession and Accounting Education. In Ethics and Sustainability in
Accounting and Finance, Volume II (pp. 219-231). Springer, Singapore.
Boisjoly, R. P and et.al., 2020. Working capital management: Financial and valuation
impacts. Journal of Business Research. 108. pp.1-8.
Carey, M., Knowles, C. and Towers-Clark, J., 2017. Accounting: a smart approach. Oxford
University Press.
Cull, M., 2017. Cash flow, budgeting and managing credit. Financial Planning in Australia,
pp.145-195.
DeFranco, A. L. and Schmidgall, R. S., 2017. Cash Budgets, Controls, and Management in
Clubs. The Journal of Hospitality Financial Management. 25(2). pp.112-
122.
DeFranco, A. L. and Schmidgall, R. S., 2017. Cash Budgets, Controls, and Management in
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Faccia, A. and Mosteanu, N. R., 2019. Accounting and blockchain technology: from double-
entry to triple-entry. The Business & Management Review. 10(2). pp.108-
116.
Gigli, S. and Mariani, L., 2018. Lost in the transition from cash to accrual accounting: Assessing
the knowledge gaps in Italian public universities. International Journal of
Public Sector Management.
Jares, T. E. and French, J. J., 2019. Chairs, Cash, Chaos. Journal of Financial Education. 45(1).
pp.166-178.
Kocsis, O. and et.al., 2021, February. An Approach to Determine Short-and Long-Term Work
Ability in Smart Work System. In International Conference on Intelligent
Human Systems Integration (pp. 388-394). Springer, Cham.
Le, B., 2019. Working capital management and firm’s valuation, profitability and
risk. International Journal of Managerial Finance.
Le, T. D. and Ngo, T., 2020. The determinants of bank profitability: A cross-country
analysis. Central Bank Review. 20(2). pp.65-73.

Manjunath, M. S. and Praveen, B., 2020. 53. EFFECTIVE CAPITAL BUDGETING
DECISIONS BY FIRMS. International Review of Business and
Economics. 4. pp.338-342.
Messer, R., 2020. Budget Management Decisions. In Financial Modeling for Decision Making:
Using MS-Excel in Accounting and Finance. Emerald Publishing Limited.
Ríos, A.M and et.al., 2018. The influence of transparency on budget forecast deviations in
municipal governments. Journal of Forecasting. 37(4). pp.457-474.
Singh, D. and Verma, A., 2018. Inventory management in supply chain. Materials Today:
Proceedings, 5(2), pp.3867-3872.
Online
10 ways to improve budgeting and forecasting. 2021. [Online]. Available through:
<https://www.accountingdepartment.com/blog/ten-ways-to-improve-your-
budgeting-forcasting>
What is cash budget?. 2021. [Online]. Available through: <
https://efinancemanagement.com/budgeting/cash-budget>