Working Capital and Cash Flow Management

Business finance and accounting

Table of Contents
PART 1............................................................................................................................................1
EXICUTIVE SUMMERY...............................................................................................................1
1) a) Explanation of profit and cash flow and their differences..................................................1
b)Explanation of the terms working capital, account receivables, inventory and payables.......2
C) Effect of changing working capital on cash flow..................................................................2
2)Effect of working capital on Mediterranean Delights Ltd.......................................................3
3)Analysis and recommendation for effective cash flow management......................................3
PART2.............................................................................................................................................4
EXICUTIVE SUMMERY...............................................................................................................4
1)Meaning of budget and advantages and disadvantages of various budgetary approaches.....4
2)Effect of budgeting methods on Second sight plc...................................................................6
3)Analysing whether traditional or modern budgetary system is
appropriate for all or any parts of the business for future projects............................................6
REFERENCES................................................................................................................................8

PART 1
EXICUTIVE SUMMERY
Working capital is net value of current assets available in business organization. The term
is used by organization to identify their liquidity status available to fulfil short term liabilities of
business organization. In this report concept of working capital and their related terms has been
defined and effect of changes in working capital on running organization has been analysis.
1) a) Explanation of profit and cash flow and their differences
Profit: Financial benefits generated from operating activities is known as profit. In other
words profit is the excess of income over expenditures incurred at fixed period of time. It can be
calculated by preparing profit statement and through using difference managerial accounting
tools like marginal costing or standard costings. Profit is an essential term for any organization
whether it is financial or non financial . Profit helps in maintain sustainability in market place.
Business organization uses profit to identify how much gain business earn from their business
activities (Al-Sartawi and Sanad, 2019).
Cash flow: It is the net value generated from cash inflow and cash out flow activities.
Cash flow is the summery of cash and cash equivalent transactions of an organization at fixed
period of time. It only considered those activities which effect liquidity status of running
business organization.
Many business organization considers cash flow and profit as smilier term but there will be
difference which are mention below:
Particular Profit Cash flow
Definition Financial gain earned by
organizations through their
business activities.
Sum up value of cash inflow
and cash outflow activities.
Purpose Main purpose of calculation of
profit is to identify growth rate
of company.
To analysis liquidity status of
an organization to pay their
day to day business
transactions.
Calculation Profit is difference of selling Cash flow is net value of cash