Business Finance: Profit, Cash Flow, Working Capital, and Cash Budget

Business
Finance

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Meaning of Profit, cash flow, how they are different:................................................................3
What is meant by working capital, includes meaning for receivables, payables, inventory:......5
How changes in working capital affects cash flow:....................................................................6
Apply concept for above element:..............................................................................................6
Recommendation:.......................................................................................................................6
TASK 2............................................................................................................................................8
Cash Budget for months 1st Jan to April:...................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business finance is about financial elements which is related to the funds which used in business.
The necessary element for business is finance. Finance is about managing funds which helps for
running business activities. Finance helps various countries for managing their activities which
includes production, HR, finance department. It is about how business using its funds for
managing its activities (Ahlström, 2019). This report is about business finance. The company
which is includes for this report is Trend Ltd. It is manufacturing business for gym clothing &
footwear. This report includes topics which are profit & cashflow, working capital, meaning for
receivables, inventory, payables, how change in working capital affects cash flow, how business
manage financial results, recommendation for improving cash flow by working capital
management. Apart from this it includes topics which is cash budget, analysis.
TASK 1
Meaning of Profit, cash flow, how they are different:
Cash flow: It is about net balance for cash outflow, inflow for businesses. Cash flow can
be negative, positive. Positive cash flow is about business has more money for inflow not
outflow. Negative cash flow is about business has more outflow not inflow. Cash flow is about
how business using its resources which includes outflow, inflow for money which helps for
running business activities. Cash flow views which business activity gives it higher profitability.
It has various activities which includes operating cash flow, investing cash flow, financing cash
flow. Cash flow refers to the net amount of cash which is present within a business. Its
calculation can be done by ensuring that the difference between the overall receipts and the
payments is taken into account which can be quite helpful in the deriving of the results. In the
context of Trend Ltd. this to the difference between the various types of receipts and payments
during a particular period of time.
Operating cash flow: It is about net cash management by normal business activities. It
helps business for growing, positive cash flow helps business for managing businesses growth. It
helps business for managing its sales which is needs for managing their activities (Akan and
Tevfik, 2020).
Investing cash flow: It is about net cash generated by business investment which
includes activities investments for securities, sale of assets, purchase of assets which includes

equipment, property. For healthy businesses which is actively investing for their businesses it
shows more investment.
Financing cash flow: This is about specially when cash moves for business, investors,
owners. It is about net cash generated for finance the business which includes debt, equity,
dividend payments.
Cash flow statement is views cash flow, financial data which design for provide detail
analysis for what happen for businesses cash. It shows various areas for which businesses use,
receives cash which views beginning, ending cash balances.
Profit: Profit is about balance when business activities expenses are subtracted by
revenues. It is about what left when the books are balance, expenses are subtracted by proceeds.
Profit can either by distributed for owners, shareholders of businesses, in form of dividend
payments, investment fir businesses. In context to profit, it use for purchase inventory for
businesses for sell, use for finance research, development for goods (Anderson, Chandy and Zia,
2018).
In context to cash flow, profit can be shows negative, positive. When data views in
negative it is loss, business spent more than earns. When data views in positive it is profit,
business earns more by its spending.
Gross profit: It is about when revenue subtracted by costs of goods sold. It includes
various elements which includes dependent upon level of output, costs of material, labour which
is related for produce goods. It doesn't includes fixed costs, which business must for its sales,
which includes rent, salary for individuals not includes for generating goods.
Operating profit: It includes operating cash flow. Operating profit which includes net
profit which businesses generates by its normal activities. It excludes negative cash flows
includes tax payments, interest payment for debts. It excludes positive cash flows by areas
outside for core businesses. It is known for earning before interest & tax. It is about when it
comes by gross profit which subtracts expenses, includes interest, tax for businesses profit.
Net profit: It is about income for various expenses which is subtract by revenues. It
includes expenses interest, tax for businesses (Babones, Åberg, and Hodzi, 2020).
Difference for cash flow, profit: