Business Finance - Analysis of Sales, Gross Profit and Cash Flow

Running head: BUSINESS FINANCE
Business Finance
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Author Note

1BUSINESS FINANCE
Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................3
References..................................................................................................................................5

2BUSINESS FINANCE
Answer to Question 1
As it can be observed from the calculations and the analyses carried out in the
spreadsheet, the firm enjoys a good financial position in terms of revenue generated by sales
of products and services in the month of January. This is because the variance deduced in the
month of January is a negative figure (-670) revealing that the sales of products and services
in the month of January is more than estimated by an amount of 670. However, this scenario
changes in the month of February as it can be observed from the table prepared that the
variance results in a positive figure. A positive variance in case of sales implies that the
actual sales has been less than what has been estimated. The month of March observes a huge
positive variance of 612 implying that the firm has missed the targeted amount of sales due to
the occurrence of any contingencies by a significant amount of 612. Lastly, the month of
April however, observes a turnaround as the variance is only 82.
In case of the cost of sales table prepared, the cost incurred in the production of the
respective goods and services have been calculated and the amount has been deducted from
the revenue gained in that particular month in order to reach the respective amounts of gross
profit. The gross profit in the month of January reveals a positive variance of 433 indicating
that the gross profit incurred is less than the budgeted figure by an amount of 433. Secondly,
the month of February however turns around by incurring a gross profit that is more than the
estimated figure by a precise amount of 289. The months of March and April both reveal a
negative variance of (- 605) and (- 199) indicating that the firm is in a stable position and in
incurring revenue more than what is expected by the management1.
1 Sponem S, Lambert C. Exploring differences in budget characteristics, roles and
satisfaction: A configurational approach. Management Accounting Research. 2016 Mar
31;30:47-61.