Business Finance: Trend Ltd Manufacturing Company Analysis

1 a).

Report addressing some issues or topics which is related to Trend ltd manufacturing company who designs the shoes and cloths of their own brands. The company have turnover of 300 million by their two key consumers Tkechers ltd and sadidas ltd. Here is some topic that is important for the ever shareholder of company.: -

Profit: - Profit is that monetary term of Trend ltd company which defines the financial benefits of company and helps to know about the capacity of business of generating profits by the different business activities of company. profit also helps in proper growth of business and to maintain goodwill in competitive market. The amount of profit is that last term which provides the actual result of company’s success or failure (Bragg 2020).

Cashflow: - Cashflow is that net amount of income and expenses of Trend ltd company and that statements which helps to know about actual cash inflow and outflow of business. this statement helps shareholders to know about the ability of business to generating positive cashflow and how to reduce excess cost and wastage of money.

Difference between cashflow and profit: -

• Profit defines the success of company in competitive market and cashflow helps to know about actual income and expenses of company.

• Profit is calculated after whole financial year and cashflow is prepare during the production process or specific time for company.

• Profit is the last result of company but the terms of cashflow can be changed according to the excess or additional cost of Trend ltd company (Nascimentoand Zanolla2020).

b). Working Capital: - Working capital is that monetary term of company which helps to know about the difference of current assets and current liabilities of business and provides the accurate information of company’s liquidity position. That means company should maintain their liquidity level of business to sort out their short-term loans and advances that helps to know that company’s current assets are able to pay their current liabilities or not (Le 2019).

Receivables: - Receivables is that amount which is not being realised by Trend ltd company that means company is exceeding their credit amounts to their consumers. The amount of receivables is result of credit sales by company. there are three types of receivables such as accounts receivables, notes receivables and other receivables.

Payables: - Payables is that amount of Trend ltd company which is owned by organization to their suppliers and vendors. That means if company is purchasing something for sake of business on credit and that credit amount is payable for company which is paid by them in specific time period.

Inventory: - Inventory is that item or property of Trend ltd company which helps in regular business activities of organization. The business activities include direct material, work in progress goods, finished goods etc. After the production process company is able to sold their goods in market and earn profits for their company (Bragg 2020).

C). Affect of changing working capital on Trend ltd company’s cashflow: -

Changing in working capital surely affect the working capital because these are the two main fundamental methods of financial analysis. Working capital guides trend ltd company evaluate the difference between current assets and current labilities of company which defines that the current assets of company is able to pay their current labilities or not and this amount of working capital maintain the liquidity measures in company whether the cashflow statement helps trend ltd company to keeping eye on the all-cash inflows and outflows of business so that they can know about the excess cost of every department of business. if Trend ltd company is buying some fixed assets like some building or plant then the working capital of company is decrease by such purchasing amount and the cashflow of company is also decrease by same amount because the buying amount affect if cash outflows as well as total assets of business and by all of that the current liabilities are remains unchanged. The second situation is, if company sell their fixed assets and earn cash amount then after this transections cash inflow is increase as well as the working capital also increase by same amount. And the last situation is, if company buy cash inventory then it would not make impact on working capital of business because the inventory and cash both are the current assets whether the cashflow is decreased by same amount of inventory purchased. These are some situations which defines that how will changing working capital affect the cashflow statement of trend ltd company (Rohini,Malarkodi,and Vanitha2020).

2.

There are some different factors of Trend ltd company that surely affect the financial statements of business. Trend ltd company had a turnover of 300 million in last year by their two key consumers Tkechers ltd and sadidas ltd other than the turnover company also have operating profit of 60 million that is before interest and tax. According to the financial statements, company also have huge number of payables 60 million which is increased by 95 million that means company has to pay such huge number of payables which increase the amount of liabilities. By calculating all receivables and payables Trade ltd company is investing 20 million in some company and give them 5 million advance amounts by acquiring their shares. This transection affects the total cash outflow of company and this investment is done by company for the sake of extra profits so they can sort their financial issues of business. by all of that the amount of current assets is majorly suffered by some situations such as trade ltd company have order of 10 million products but they have facing 12.5 million disputes for the delivery of goods from sadidas ltd from 2019 and the other problem is this company believes that company is providing sub standard material so they refuse to pay their amount and threat them with the legal action while the major problem is the huge amount of inventory is stored in Trade ltd company’s warehouse that is in London UK.

3. Recommendations: -

Trade ltd company has sufficient amount of revenue or profits in last year but still they need to improve some financial conditions of business to grow more faster and brighter. By analysing the whole scenario Trade ltd company first needs to sort out the dispute between sadidas ltd so that they can take back their legal actions and trade company is able to reflect their side and pay their amount of 12.5 million whether it is increase or decrease. After sorting out such dispute company needs to take care of stored inventory before the whole goods has damaged. The trade ltd company is facing the major problem which is huge amount of debt. the amount of debt is increasing by 35 million which is not small amount, of that company needs to increase their current assets and liquidity amount s that they can able to pay off their loan. Other than that company also needs to motivate investors to spend their money in company so that investors can get sufficient number of incentives. Trade ltd company also encourage their consumers for buying their products in sake of discounts or some other profits. By applying these steps company can overcome their financial issues and increase their profits in competitive market which helps them to grow better and faster.