Business Finance: Profit, Cash Flow, Working Capital, Receivables, Inventory, Payables

Business Finance

Contents
EXECUTIVE SUMMARY.........................................................................................................................4
TASK 1.......................................................................................................................................................4
1. (a) What is meant by Profit and Cash flow and how they are different?.............................................4
b. What is meant by Working Capital and, the meanings of Receivables, Inventory and Payables?.......5
C. Changes in working capital affect cash flow.......................................................................................6
II Apply the concepts in (i) above to this company to show how the way the company is being managed
might affect its financial results...............................................................................................................6
III) Analyze and recommend what steps should now be taken to improve this company’s cash flow
through better Working Capital management..........................................................................................7
TASK 2.......................................................................................................................................................8
EXECUTIVE SUMMARY.........................................................................................................................8
1. Prepare a monthly cash budget for the four months from 1st Jan to 30 April 2021.............................8
2. Observations or recommendations that you would make to the management of Thorne Estates.......11
REFERENCES..........................................................................................................................................12

EXECUTIVE SUMMARY
Business Finance is the increasing and utilization of money by businesses. The financial
manager, who is commonly near the top of a company's business operations, is in charge of
organizing, research, and control operations. Significant financial decisions are frequently made
by a budget committee in large corporations. In small businesses, the proprietor is primarily in
charge of the economic transactions (Ángeles López-Cabarcos, M Pérez-Pico and López Perez,
2020). Lower-level employees handle much of the daily operations task of business finance, such
as controlling revenue and expenditure, lending from banking sector on a continuous and
consistent premise, and developing financial statement. This report based on the Trend limited
which is manufacturing of cloths and accessories of gym. In this report consist of concept of the
cash flow and profit with their differences. Moreover provide appropriate recommendations in
regard of the working capital and cash flow management.
TASK 1
1. (a) What is meant by Profit and Cash flow and how they are different?
Profit: It is the motivation for company owners to spend. It is charged directly as wages
in small businesses. It can often be paid to investors in the form of distributions in companies.
When expenditures exceed sales, this is referred to as a loss. If a corporation faces deficits for an
extended period of time, it will go bankruptcy. In addition, profit is described as the amount
obtained from exporting a commodity that should be greater than the manufacturer's market
rates.
Cash Flow: The inflow and outflow of cash or its variations in industry is referred to as
cash flow. It measures the sums of cash expended or gained during a given time span. Its
research also discusses the current drivers of cash flow as well as the potential extent of inflows.
The actual cash flow for a specified timeframe is calculated by subtracting the availability – from
the balance at the end (Li, Wang and Wu, 2021).
Difference between profit and cash flow
Particular Profit Cash flow