Business Finance: Profit, Cash Flow, Working Capital, and Management's Effect on Financial Results

Business Finance
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Table of Contents
Task 1...............................................................................................................................................3
Executive summary.....................................................................................................................3
i. Explain:.....................................................................................................................................3
a. Profit and cash flow.............................................................................................................3
b. Working capital.......................................................................................................................4
c. Effect of changes in Working Capital......................................................................................5
ii. Effect of company’s management on financial results............................................................6
iii. Recommendations..................................................................................................................6
Task 2...............................................................................................................................................8
Executive Summary.....................................................................................................................8
1. Monthly cash budget................................................................................................................8
2. Recommendation:....................................................................................................................9
References......................................................................................................................................13
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Task 1
Executive summary
There is a maxim on business that "money is best" and, assuming so, it is the income from the
blood that keeps the heart of the filter in the kingdom. Turnover is perhaps the most fundamental
development segment for a small or medium-sized company. Without money, the benefits are
useless. Much productive activity on paper ended in Chapter 11 because the amount of money
coming in is no different and the amount of money going out. Companies that do not use large
sums of money will not be able to afford the expected profits or may have to pay more to get
money for the job. "Despite how money is the soul of a company - the fuel that keeps the engine
running - most entrepreneurs have no idea of their income, CPA and CFO first in some
organizations and creators of Never Run out of Unsupported Income advice are causing more
business frustration today than ever as a recent reminder.
i. Explain:
a. Profit and cash flow
Cashflow
It's basically developing resources across your business. Company should follow it week after
week, month by month or quarterly. There are of course two types of cash flows:
• Positive cash flow: This happens when the money from your business from contracts, sales
records, etc. exceeds the amount of money your organization leaves through liabilities creditors,
monthly expenses, compensation and so on.
• Negative cash flow: This happens when your cash flow is more important than your cash flow.
This usually means something bad for a business, but there are steps you can take to remedy the
situation and create or raise more money while maintaining or cutting costs.
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Profit
Earnings reflect the cash benefit recognized when the income generated from the transfer of a
business exceeds the costs, expenses and costs involved in supporting the business. Any benefits
received will be donated to the entrepreneurs, who decide to return the money or return it to the
industry. The benefit is declared as total income excluding all expenses.
The owners and investors of the group can benefit, regularly as profit margins, or reinvest in the
group. Benefits, for example, can be used to buy new shares to sell a business or to finance
innovative work (R&D) for new items or administrations. Like income, profit can be expressed
as a positive or negative number. By the time this estimate gives a negative number, it is often
referred to as bad luck, as the organization was facing more financial work than it had the ability
to recover from these activities.
Profit vs. Cashflows
The important difference between Profit and Cashflows is that while an advantage shows the
amount of money remaining after all expenses have been paid, the income shows the net
progress of money in and out of the business.
Cash flow is the amount of money that flows through the entire business over a period of time
and is a benefit of whatever income is found after expenses. While it is beneficial to do business
quickly, revenue can also be a more effective way to determine an organization's cash flow
position. In this sense, time is the crucial difference between the two measurements.
b. Working capital
Working capital, also known as net working capital (NWC), is the difference between an
organization's current assets, such as cash, sales records (invoices neglected by customers), and
stocks of raw materials and finished goods, and its current liabilities, for example, the creditor's
liabilities. Net working capital is a percentage of an organization’s liquidity and refers to the
difference between current working resources and current workloads. These numbers are
generally the same and can be obtained from the organization's money as well as credits as well
as an inventory, fewer records to pay and fewer expenses collected.
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