Business Finance Report

Business finance report

TABLE OF CONTENTS
TASK 1............................................................................................................................................3
I). A. Profit and Cash flow...........................................................................................................3
B. Working capital and receivable, inventory and payable.........................................................4
c. Impact of working capital on cash flow...................................................................................5
ii. Application and analysis..........................................................................................................5
iii. Recommendation of the steps to be taken..............................................................................6
TASK 2............................................................................................................................................7
1. Monthly cash budget for Thorne Co........................................................................................7
2. Observation or recommendation from the analysis of the budget...........................................8
REFERENCES..............................................................................................................................10

TASK 1
I). A. Profit and Cash flow
Cash flow is the net amount of cash and cash equivalent which is transfer in and out from
business for activities. Cash inflows shows the cashed received by company and cash outflow
refers to cash spend by company. Company need to maintain positive cash flow statement that
determine by ability to shareholders. Free cash flow refers to cash flow by business that is
generated from the normal business operation after removing expenditure spend on capital.
These are generated through all main activities of business. These activities are purchasing of
capital assert and invest in other business venture. The financing cash also include issuing debt,
equity made by company for payment or gained(NGUYEN and NGUYEN, 2020).
The cash recovered from interest, investment, royalties or licensing agreement are
included in cash inflow by company. Whereas, spending cash on selling products, credits and
other expenditure are included in the cash outflow. The positive cash flow of company shows the
company liquidity asserts are increasing, returns to shareholders, paying all expenses of company
and reserves against future financial challenges (Saleem and Ahmed, 2020). While cash flow
doesn't show the performance of company and only shows the company expenditures and return
which are gained by company. There are various cash flows in company which include, cash
flow from operation, cash flow from investment and cash flow from financial activities.
Profit refers to financial benefits realized when revenue generated from business
activities where profit is shown after including all expenditures, cost and taxes paid by company.
The profits of business are gained by owner of business which may further reinvested by owner
in business. Profits can be calculated from total revenue earned less total expenses. Thee primary
activity of business to earn money to gain profits from it. There are various types of profit which
are shown in company's financial statements. The Gross profits shows revenue generated from
sales less cost of good sold by company. Second profits is operating profits which shows
operating profits by company. Operating profits is calculated as gross profit less operating
expenses. Third one is net profit which shows the final profit of company left over all expenses
like taxes and other expenses.
They both are different from each other as cash flow statement and both are important
metric for business. Profit indicates the final amount of money that is remained after all expenses

ow and profit is tare deducted and paid by company whereas cash flow statement shows the net
flow of cash in and out in origination. Cash flow can be negative and still company can operate
in market without it but negative profit shows the company is unable to achieve their target and
not longer survive in market (Boisjoly, Conine Jr, and McDonald IV, 2020). The inflow and
outflow of cash is occurred frequently where company's profits are shown after the one year.
Cash flow Statement shows each expense and income of company with details while profits are
shown overall by reducing all expense of company which are known after the balance sheet is
prepared.
B. Working capital and receivable, inventory and payable Working capital: It is a difference between current asserts of company which include
account receivable, cash, inventories of raw material and finished goods. On the other
side current liabilities are shows account payables. Net operating working capitals are
calculated through company's liquidity and difference between operating current asserts
and current liabilities. Receivables: This are refers to account receivables and debts own to company by its
customers for goods and services they are dealing in are delivered to customers but not
paid to company. It means company selling products on credit to its customers for goods
and service they provided (Dey, and et.al., 2021).These are notes on receivable at a time
of sale and noted as credit sales. This also considered as liquid asserts as they can be used
for collateral to secure loan and help company to meet short term loans. Inventory: It refers to goods available for sale to consumers and raw material used to
produce goods available for sale. It is one of the most important asserts of company as
turnover of inventory shows the primary sources to generate receive and earn profits by
company. Inventory is considered as a current assert on company's balance sheet. This
inventory carries cost to convert raw material into finished goods which are considered as
Cost of good sold.
 Payables: Account payable is an account within ledger of company that shows the
liabilities to pay off short term loans to creditors or payment to suppliers. The sum of
vendor amount is shows on the account of balance sheet liability side as account payable.
If there is any increase or decrease in account payables, then it is shown on cash flow
statements. Major amount in account payables are shown of outstanding bills paid to