Business Finance Flow Of Bright Lawns Ltd.

Company is managed by Simmo, the grandson of the founder. Simmo owns 25% of the shares,  remaining 75% is split between three other grandchildren.

Most of BLL’s clients are large retailers in UK and EU. Two key customers are C&P DIY Ltd and BricoFrance SA, which are both large chains of DIY and garden centres in the UK and France.

Other shareholders are concerned about the business. Although there seems to be enough of work coming in and the last year has been reasonably profitable (Operating profit was £5 million last year before interest and tax), the company’s debt has increased to £18 million from £16 million the year before. Simmo started talking about the need of other shareholders to invest more money to minimize  debt.

End of last year BLL acquired a 30% stake in a company which designs ornamental garden fountains and water features. BLL invested £10 million in the company to acquire shares and has agreed to pay an £8 million advance fee for exclusive use of the designs.

The company is owed £1.5 million pounds for a series of large orders by C&P last year. There is also an outstanding dispute about a £2 million consignment for BricoFrance completed in 2017. This has led to payment being with held whereas negotiations continue between lawyers and technical specialists.

Further problem that Simmo believes the BricoFrance issue arose from faulty workmanship by a contractor which BLL engaged in 2017. He has refused to pay the contractor who is now threatening legal action. Because this area of work has been suspended, a large stock of materials and supplies has built up at the company’s London site. Simmo insists that the company requires to have this level of stock for when the dispute is sorted out. He is also pressing customers too hard for payment.

The other shareholders have approached BLL’s accountants to monitor the situation.

Prepare 1250 words report address following issue.

Using the reading list provided on the VLE,

explain:

  a. what is Profit and Cash flow and how they are different

  b. what is Working Capital and, the meanings of Receivables, Inventory and Payables

  c. How changes in Working Capital impacts Cash flow

ii. Implement the concepts in (i) above to this company to demonstrate how  the company is being managed might affect its financial results.

iii. Analyse what steps should  be taken to improve this company’s cash flow through better Working Capital management.

Part 2

Boat world Plc is an international leisure company who rents boats to holiday makers. Company operates its functions in UK and France.

Company has been operating since 25 years and had revenues of £250 million in last year. It was listed on the London Stock Exchange 10 years ago and capture market capitalisation of £300 million with debt of £50 million. The founder, James, is the CEO and owns 15% of the shares.

Headquarters is located in Woking which accommodates 20 staff including management, sales, HR, finance and administration. They are having three operations in the UK and five in France. In these centres they employs 125 staff assisting customers and maintaining the boats.

The company is planning to operate new outlet in the Netherlands and two in Germany. This will lead to the rollout of 30 new boats.

The company used traditional budgeting system. The Finance Director, Hayley, joined 3 years ago but is concerned that this approach might not be suitable. However, if a change of budget approach is prepares, she thinks it should happen in time for next year’s budget process. That way any “bugs” can be ironed out before the company goes through  essential changes in coming years.

Requirements:

Prepare reports of 1250 words    

Evaluate purposes of preparing a budget; an explanation of a) traditional budgeting approaches and b) alternative budget methods: rolling budgets, zero based budgets and activity-based budgets, discuss their relative strengths and weaknesses .

1. Show the application of these methods evaluate how they used to plan future cost management for the specific business. Provide your answer with examples of how products and processes for this business would be budgeted in traditional approach and using the alternative methods.

• Illustrate whether a traditional or alternative budgetary system is suitable to all or any parts of the business in its planned future form.

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Assessment Criteria

Demonstrate your knowledge in a). The  management of cash and b). techniques of budget

Part 1 of the assignment should explain the difference between cash flow and profit. Your answer explain why the accounts of a business can report a profit but a shortage of cash, and evaluate the consequences to a business of being short of cash. Causes of cash flow problems should be discuss using the case study,  regarding the management of working capital. Methods for dealing with cash flow problems and managing cash for the business described should be proposed and evaluated.

Part 2 of the assignment should focus on the role of budgets in the terms of planning and control. Your answer should explain traditional budgetary systems and on alternative systems such as ZBB, ABB and rolling budgets, and discuss how they work. Answer should provide a breakdown of the advantages and disadvantages relating to each system identified.

Ensure that your answers in both parts make particular reference to the business.

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