Business Finance: Meaning, Difference between Profit and Cash Flows

Business finance

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
i. a) Determining the meaning and difference between profit and cash flows............................1
b.) Reviewing meaning of working capital, payables, inventory and receivables......................2
c.) Determining how changes in working capital tends to affect cash flows..............................2
ii.) Determining how the way company is managed tend to affect financial results.................3
iii.) Analysing and recommending ways to improve cash flow of the company through
working capital management. ....................................................................................................3
PART 2............................................................................................................................................4
i.) Understanding the purpose of preparing budget.....................................................................4
ii.) Demonstrating how the company use future cost management. ..........................................5
iii.) Analysing alternative or traditional budgetary system. .......................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business finance is referred to as a money which is employed in the business (Burnsand
Dewhurst, 2016). Business finance is mainly responsible for the creating economic forecast,
allocation of resources, reviewing various opportunities for debt and equity financing, etc. This
report will determine the meaning and difference between profit and cash flows. It also
highlights on meaning associated with working capital and its effect on cash flows. It also helps
in determining ways through which company can manage its financial results and also focuses on
improving the cash flow of the company through working capital management. Furthermore, this
study also includes purpose of budgeting.
PART 1
i. a) Determining the meaning and difference between profit and cash flows.
PARTICULARS PROFIT CASH FLOWS
Meaning Profit is considered to be as a
financial gain after considering
all business expenses
(Kraemer-Eis and et.al., 2019).
This helps in determining the
financial benefits which has
been realized when revenue
generated is more than the
expenses, tax and cost.
This is referred to as the
amount of cash which the
company receives or disburse
for a particular period of time.
Indication of positive profit
and cash flows
Positive profit states that the
company has been gaining
several financial gains.
Positive cash flow states that
the cash inflow of the
company exceeds cash outflow
of the company. This
indicates that the liquid assets
of the company are increasing.
Formula Sales- Variable cost- fixed
cost= Net profit
Cash inflows- Cash outflows=
Net cash flows
1