Business Finance, Products Or Services, Consumers (Research Paper Sample)

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Executive Summary
Profit maximization is essential for business as it provides a stable performance of the organization. The management is required to perform an adequate financial analysis to develop plans that will ensure a continuous increase of the organization. Financial management provides the business with the required information for decision making.
 
Introduction
It is essential to ensure that there are quality products that will make the organization acquire a competitive edge in the market. Working capital, cash flow and profits are vital in the achieving the set long-term goals of the business. An organization is required to invest in long-term projects that will make the business brand widely accepted to the targeted consumers (Schaper, Volery, Weber & Gibson 2014). Garden Rite Ltd is a family business which focuses on increasing quality of products and services offered to the consumers for a sustainable competitive advantage.
TASK 1
Profits
The profits are acquired by deducting expenses from revenue acquired from the sale of products or services to the consumers. It is a financial gain for the organization which makes it possible for the business to expand for the achievement of set goals of production. In maximizing, profit levels of the company the management are required to reduce expenses and increase the revenue through effective marketing strategies. Gross profit is acquired by subtracting costs from revenue. The interest rate and tax are deducted from the gross profits to obtain the net profit for the organization (Schaper, Volery, Weber & Gibson 2014). Proper strategies make it possible for an organization to achieve the set profit targets through quality production.
Cash flow
This refers to the money that is used by the organization to perform their daily operations. The cash flows of an organization can either be positive or negative based on the flow of finances in the business. The positive cash flow is achieved when the cash inflow of the organization is higher than the cash outflow while negative cash flow is achieved when the cash inflow is less the cash outflow. Cash management is vital for an organization to have strong operations in the market due to the ability to perform the basic functions in production (Inc.com, 2017). The cash flow of an organization is increased through improved sales volume, acquiring loans and reducing operational expenses.
Working Capital
The current assets and current liabilities are used to determine the working capital of the organization. Working capital is current assets less current liability which makes it possible to achieve the set short-term goals of an organization. The working capital is vital for a smooth flow of daily operations of the business as the current assets, and current liabilities are mainly used in the production of products or services to the targeted consumers. According to (Bragg, 2017) working capital ratio of 1.2 to 2 is appropriate for an organization to achieve set goals. The ratio of over 2 is an indication that the organization does not invest in assets while the working capital ratio of less than 1 is an indication that the business is operating on credit.
Receivable
This refers to the amount that is due to the companies from consumers and other debtors of the company. Receivables are current assets of an organization as it increases the working capital of the business (Swift & Piff 2014). The goods sold on credit are stated as receivable as the money will be paid to the company at a later date. Proper management of receivable increases the working capital of an organization for the achievement of set production goals.
Inventory
This refers to the work in progress, finished goods and raw materials of a business which facilitate production. It is essential for an organization to use advanced technology in inventory management for a continuous development of products and services to the targeted consumers. The flow of goods from the manufacturer to the warehouses require proper management to ensure that an appropriate flow of inventory for the business. According to Rouse (2017), the use of inventory management software makes it possible for an organization to increase the performance in the market.
Payable
This is the amount of fund which is due from the company by the suppliers or creditors. Payable are current liabilities which require management for a sustainable performance of the business (Dudin, Prokofev, Fedorova & Frygin 2014). The business is required to reduce the amount of payable for an increased performance of the business.
Effects of working capital on cash flow
The working capital ratio is used to ensure that there is a stable performance of the business through current asset investment. An increase in working capital leads to a decrease in cash flow requiring a proper evaluation of current assets and current liabilities. It is vital for the management to ensure that there is the evaluation of working capital to ensure that there is increased cash inflow compared to cash outflow in the business (Bank of America, 2017). The short-term investment is measured through the working capital ratio requiring an investment that does not negatively affect the cash flow of the business.
Garden Rite Ltd financial results
Garden Rite Ltd (GRL) financial management is vital for a stable performance of the business.GRL is a family business with Dean the majority shareholder with 25% while the rest of the shares are shared between Hashim, Dale and Faf (Garden-Rite, 2017). The company has a continuous increase of sales volume through an acquisition of large consumers namely C&P DIY Ltd and BricoFrance. Growth in sales volume is essential in acquiring set profit levels of the business. GRL has £5 million profits in 2016 although the credit levels of the company increased from £16 million to £18 million (Garden-Rite, 2017). An organization is required to raise the level of profits considering the credit levels of the business. The credit acquired by the business is necessary to reduce for a stable performance of the business in the long-term production. The working capital of GRL influences the cash flow of the business requiring proper management of current assets and current liabilities of the business. GRL has a receivable amount of C&P at £1.5 million and BricoFrance at £2 million. An organization is required to have proper collection strategies that will increase the cash flow of the business while minimizing the amount receivables from consumers or debtors of the business. In dealing with the debt and receivable increase in the organization the manager, Dean has required other shareholders of the business to invest more in the business.
Recommendation for improving working capital and cash flow
It is essential for an organization to improve the working capital and cash flow through the following suggestions. One is the development of effective collection strategies that will reduce the amount of amount receivable due to the company. GRL is required to come up with a plan that will ensure that the C&P at £1.5 million and BricoFrance at £2 million are collected at the appropriate time. Collecting receivables of the market are increases the cash flow of the organization for an expansion of the business (Inc.com, 2017). Two is increased sales volume of the company through quality production and marketing of the business. The quality production makes it possible for an organization to have increased number of consumers who are willing and able to use the consumers of the company. Marketing is used to make the products known to the targeted consumers for a stable performance of the business. Three is the management of expenses of the business for a stable performance of the business (McKonly & Asbury, 2017). The expenses of the business are improved to ensure that there is an increase in the cash inflow of the business compared to the outflows. Proper management of expenses provides the business with required finances to achieve the set production goals. Four is the review of processes in the organization to have an insight on the departments which requires change for improved cash flow and working capital. The finance, marketing, and operations departments are required to collaborate to ensure that there is a stable performance of the business. Lastly is the development of strategies that will increase the working capital and cash flow of the company (PwC, 2017). Stakeholders of the company are required to comply with the set rule in achieving an increased performance of the business.
Task 2
Capital Budgeting
The company is required to implement effective capital budgeting strategy that will provide future benefits for the organization. Investment projects are implemented by the business to expand into new markets. The decisions of investment require considering the capital operations benefits for a continuous development of business (Dellavigna & Pollet 2013). The future success of the business is achieved through investment in best projects in the market. The management is required to identify the market niche for a stable performance of an organization. The capital decisions involve expansions to new markets, product development, and purchase of new equipment used for production.
Top management is required to understand capital budgeting process for a successful implementation of investments by an organization. One is identifying the potential in the market through the analysis of the external business environment. The strengths, weaknesses, opportunities and threats of organizations are identified through the SWOT analysis. The dynamic external enviro...