Business Finance: Profit, Cash Flow, and Working Capital

Business finance

EXECUTIVE SUMMARY
Business financing implies the money and credit used in the corporation. Funding is the
corporate base. Acquisitions of land, commodities, manufactured goods and other economic
operations are needed under financial requirements. The term Business Finance represents the
amount of money spent on a company. Financing is important for a company, and it is necessary
to buy assets, raw materials, maintain the business and manage all related to business financial
operations. The report is divided into two parts in which part one summarizes about concept of
profit, receivables, payables and role of cash flow in management of working capital. In addition
to this part two of report summarizes about role of cash flow as well as calculation of cash flow
is also done in accordance of given scenario. In addition to this, recommendation is also
provided to respective company as per the analysis of cash flow in a significant manner.

Contents
EXECUTIVE SUMMARY.........................................................................................................................2
TASK 1.......................................................................................................................................................4
TASK 2.......................................................................................................................................................6
REFERENCES..........................................................................................................................................11

TASK 1
Explain:
a. what is meant by Profit and Cash flow and how they are different
The profit is based exclusively on the accounting concept used to exclude revenue, including
depletion and taxation, after sales costs have been deducted (Klopotan, Zoroja and Meško 2018).
Cash flow, as its name implies, either payment or collection is the transfer of cash. Non-
Financial investments including depreciation are the main differences in cash flow and profit.
Operating expenses and financial income or loss. The profit accounts for these non-cash costs,
but they are ignored by the cash flow strategy. Cash flow is none but is not widely used for
capital budgeting and financial reporting.
CF is a big concern for investors and businesses, since it is corporate lifeblood. "How does the
CF vary from the revenues of a corporation?" Income and benefit are built on the concepts of
accrual accounting that smooth out costs and balance profit as product lines are provided. In fact,
a corporation's own operating income or net benefit could vary significantly from CAF based on
profit means of a systematic and the corresponding concept.
b. what is meant by Working Capital
Working capital is classified as net work capital (NWC) and differs from existing assets of the
Business, for example currency, receivable accounts (unpaid consumer bills) and inventory of
commodities and final inventory and their interest expense, for instance, cash management (Mia
and Sufi, 2018). Net operating capital is a liquidity measurement of a business that refers to the
discrepancy between actual operating assets and total revenues liabilities. The calculations are
often identical and come from business cash plus receivable accounts and stock, less payable
accounts and less expenditure. Working capital refers to the disparity between existing and
current assets. This is done to see just how many outstanding liabilities Current Assets Company
has to pay. That is called the liquidity method, where lenders lock it in to see if the enterprise is
sufficiently solvent to pay its short-term commitments. Current assets include accounts or
commercial debts and are clients of the business who have to compensate the goods or services
that they receive. The stock applies to the products that the company buys and holds to sell to its