Difference between profit and cash flow with their concepts

Business Finance

Contents
Contents...........................................................................................................................................2
Task 1...............................................................................................................................................1
Difference between profit and cash flow with their concepts.....................................................1
Definition of Inventory, working capital, Receivables and Payables..........................................1
Task 2...............................................................................................................................................5
Cash budget for Throne Estate....................................................................................................5
Recommendation:........................................................................................................................9
REFERENCES..............................................................................................................................10

Task 1
Difference between profit and cash flow with their concepts
In a business perspective, both cash flow and profit are considering to be the most
important elements as a proper cash flow will definitely lead to a specific profit at a certain point
of time. However, these two elements are totally different with one another, thus company must
be able to understand the difference between profit and cash flow in order to get success and
attain maximum revenues (Ady and et.al., 2020. The same difference is discussed below:
Profit: It is related to the remaining balance which is left behind after subtracting
expenses from revenue generated for a specific time. In every sort of firm, the main focus is to
generate a decent revenue through all its operation which will off sure cover the expenses made
on such activities that enables to maintain a good amount of profit that will increase company
performance in future.
Cash flow: In operating any business task company have to make an investment or it includes a
certain cash flow which will make its profitable after specific timeframe to generate cash
inflows. In case if company is either buying raw products or making any investment to add or
upgrade services there will a specific cash flow with the intention that product or service will
make cash inflow in future. Different exercises like paying of compensations, service charges,
upkeep charges, lease comprises of outflow of money whereas sales, commission are inflows
within business. Thus cash flow statement alludes to the net measure of money inflow and
outflow of a business in a particular period.
Definition of Inventory, working capital, Receivables and Payables
Inventory: Stock is the supply of products which the business holds or productions and trades
the equivalent with or without value expansion. Stock can be additionally characterized into 3
essential sorts; crude material, work in advancement and completed products. This is considered
as current resource for a company which can be converted into cash whenever required.
Working capital: Working capital alludes to the difference between total current assets or
resources and current liabilities (Beck and Levine eds., 2018). Current assets comprise;
inventories of crude material, money, debt holders, inventories of work in advancement and
completed products and so on. Current liabilities comprise of; temporary borrowings, AP,
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