Business Finance: Profit, Cash Flow, Working Capital, Budgetary Tools

Project Business Finance

EXECUTIVE SUMMARY
This study has evaluated that, business finance helps company to manage their funds
effectively within the business. This study has highlights that, profit is referred to as the income
generated by the business after deducting total cost from the total revenue. Cash flow is referred
to as the amount of money that has been transferred in and out of the business. It has been
determined that, working capital is referred to as the difference between current asset and current
liability of the company. This study conclude s that, change in working capital results in change
in cash flow of the company. Furthermore, this study has developed an understanding on
traditional budget and various alternative budgetary tools. Lastly, it concludes that, budgetary
tool helps in planning future cost management.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
PART 1............................................................................................................................................4
1. a.) Assessment of Profit and cash flow....................................................................................4
b.) Analysing working capital, inventory, receivables and payables..........................................5
c.) Assessing how change in working capital influence cash flow of the company....................5
2. Determining how the current management of the company affects financial results..............6
3. Analysing and recommending ways to improve cash flow of the company...........................6
PART 2............................................................................................................................................7
1. Understanding on the various budgetary tools.........................................................................7
2. Application of budgetary tools for planning future cost management....................................9
3. Analysing traditional and alternative budgetary system........................................................10
RECOMMENDATION.................................................................................................................10
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
The main purpose of budgeting is that it is useful in controlling, planning, executing and
monitoring the performance of the business. The key role of budget is to forecast the budget by
effectively developing various strategies and analysing the trends. Budget gives input or
evaluating performance of each departments and thereby helps in setting appropriate
remuneration. Business finance is referred to as the information which is contained in the
financial reports like balance sheet, income statement and cash flow statement (CFS). It helps
company to manage their funds effectively within the business in order to attain higher
operational goals and efficiency. This study will highlight, the difference between Profit and
cash flow statement. It will further analyse working capital, inventory, receivables and payables.
This study also demonstrating how change in working capital influence cash flow of the
company. Furthermore, this study focuses on developing an understanding on the various
budgetary tools and it helps in determining how is it useful in planning future cost management.
PART 1
1. a.) Assessment of Profit and cash flow.
Profit is referred to as the financial gain from the business after deducting all the
expenses. Profit is referred to as the income generated by the business after deducting total cost
from the total revenue. Cash flow is referred to as the amount of money that has been transferred
in and out of the business. This is the net amount of cash which has been received and disbursed
by the business during the particular financial year (The Critical Difference Between Profit and
Cash Flow, 2019). The cash flow of the company can be positive while having no profit. This
happens when the company has other source of funds other than income. On the contrary, the
cash flow of the company can be negative while having large profit. This happens when the
company tends to make various personal expenses. Profit is one of the most common measure to
evaluate the financial position and success of the business. On the contrary, cash flow is
considered to be more important for the business because it focuses on running the business for
the sustainable period (Aktas, Croci and Petmezas, 2015). Profit is useful in determining the
success of the business. Cash flow is considered to be one of the important metric to effectively
evaluate and assess the long term and short term borrowings of the business.