Budgeting Methods for Second Sight PLC

Table of cointent

INTRODUCTION
Question 1
Meaning of cashflow and profit and difference between these two terms:
Profit: It is financial gain arising from business activities. In other words, profit is
generated by firms when their amount of sell is higher than their cost. Business
organisations can gain profit not only from their operating business activities but also from
non-financial activities.
Cashflow: It is the net amount of cash and cash equiviwnt activities generated in fixed time
period. Business organisations prepare cashflow statement to identify transactions which
generates cash inflow and cash outflow activities in running business organization.
Many people consider profit and cashflow as similar term but there are some difference
among these two term these are describe below:
Particular Profit Cashflow
Meaning It is the net value generated
by companies by providing
products and services to
customers.
Cashflow inflow and cash
outflow from financial,
operating, and investing
business activities.
Objective Main purpose of calculating
profit is to maintain
sustainability in running
organization.
Main objective of
preparing cash flow
statement is to analysing
activity which are more
profitable and expensive.
Calculation Profit can be calculated by
calculating difference
between sell value and cost
of producing products.
Cashflow are calculated by
preparing cashflow
statement on monthly or
annually basis.
Time period
1