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Junior Management Accountant in a City Firm

Contents: Pg:
P1
➢ Cashflow.......................................... 3 ➢ Working Capital................................... 3 ➢ Cost and Budgets.................................. 4 ➢ Breakeven ........................................ 4 M1

➢ M1 B.............................................. 5 ➢ M1 C.............................................. 5 ➢ M1 D.............................................. 6 ➢ M1 E.............................................. 6 ➢ M1 F.............................................. 7 ➢ M1 G.............................................. 7 D1

➢ Evaluate and justify recommendations on ways in which problems with Cashflow, working capital, costs and budgets and breakeven may be addressed for a profitable business.

P1
Cashflow:

Cashflow is the cash that inflows and outflow as the business produces product and sells them. Cashflow forecast shows an estimate of monthly receipt and payment over forthcoming period normally 6 or 12 months. This means that City Firm can estimate the cash that is available to it. The importance of Cashflow is that City Firm as an estimate of the cash that is available; also, they can control the receipt and payment so that cash is available as and when it’s needed. This involves using forecasts to identify problems ahead of time then taking the appropriate action; for example, problem such as not enough capital, stock held, the bank is not helpful enough in giving loans and overdraft or too much is spent on equipment. City Firm as many solution to solve Cashflow problems for example, cutting running cost, increasing sales revenue, raising more capital either for owners or for financial backers or borrowing loans. These are important to City Firm, as it will improve their performance as well as them controlling their receipt and payment.

Working Capital

Working capital is the money that City Firm needs to run their business from day to day. Working capital represents the cash available to a business to finance its day-to-day activities, without working capital wages would not be paid, suppliers bills would not be settled or the mortgage will be in arrears and eventually City Firm may even close. The working capital is shown as:

Problems may occur because payment for purchases of stock are made ahead of sales, especially when sales are on credit, the business needs to invest now for some future returns or overhead payments coincide. These problems Can be solves if City Firm reducing payment, delaying payment until cash is available by buying on credit, increase receipt through borrowing money or collecting receipt more quickly. It is important for City Firm to draw up Cashflow forecast to identify possible problems for working capital and take appropriate action in advance.

Costs and Budgets:

Budget is an agreed plan that is served as a target for future period; it may be set for sales, purchases, production or expenditure. There are quantitative budget, which show estimated number of units and financial budget, which shows estimated costs, revenues and expressed in pounds. City Firm needs to manage their budget so that they make sure that the budget is working and the manager understands its responsibilities, also he/she has a clear target and knows what their department are trying to achieve, to control what they spent on or to control their loans and unprepared bills and pay them. The budgeting process involves the City Firm in drawing up detailed estimates for their area and turning these into target for coming months. Purposes and benefits using budgets is that a budget assists planning, formalising an agreed objective of city firm through the budget preparation system they can ensure that its plans are...
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