Why there is a difference between the Net Cash Flow and Net Profit (Net Income) for the quarter?

Why there is a difference between the Net Cash Flow and Net Profit (Net Income) for the quarter?

Part B: Preparation of Reports [Total: 30 marks]
Lilly Lavender owns and operates Lilly Lavender’s Flower Shop, a flower sales and arranging
service. Lilly works in the business full time. The Cash Flow Forecast and Projected Income
Statement for the first quarter of 2015 was prepared by a friend of Lilly’s. Lilly is unsure as to
what they mean and does not understand why there is such a difference between the profits
and bank balance.
Additional information:
• Lilly has provided the sales forecasts on which the statements are based. She provides
flower arranging services to local businesses and she decided to allow most of her
customers to buy on credit from January 2015. She pays her suppliers cash.
• Lilly is planning on expanding her business in the first quarter of 2015. She plans to
buy a delivery van at the start of the quarter. She is not planning on selling the old
vehicle. The new van will cost $30,000 and she would like to buy it for cash.
• The business currently employs one lady, Marjory Maud, and the monthly salaries bill is
$3,500. Lilly has decided to offer an additional position to a friend, Rosemary Ruth, at a
monthly salary of $4,000. Rosemary accepted the offer and will be starting on the 1
February 2015.
• The annual insurance premium of $3,600 was paid on 1 July 2014.
• Currently Lilly withdraws $8,000 a month for personal expenses but she wants to
increase it by 50% in February.
• Lilly has inherited money and she is considering investing $35,000 into the business
by March 2015.
Appendix A and B:
• Appendix A: The projected financial statements for Lilly Lavender’s Flower Shop and
• Appendix B: Guidelines for report writing.

10 115.102 Assignment 2 1402
With reference to the projected financial statements, write a business report for Lilly covering
the following aspects:
(i) Why there is a difference between the Net Cash Flow and Net Profit (Net Income) for the
(ii) What the Projected Income Statement shows the profitability of the business.

(iii)What the Cash Flow Forecast reveals about the business.
(iv)What advice you would give to Lilly.
Use the following headings for items (i) to (iii) above as headings in the discussion section of the
report and (iv) in the Conclusion and Recommendations
(i) Difference between cash balance and profit. (6 marks)
(ii) Profitability of the business. (4 marks)
(iii) Estimated cash flow (8 marks)
(iv) Conclusion and Recommendations (6 marks)
Complete this report in a Word document file. (No template is given.)
(Report formatting 6 marks)
Answers should be well reasoned, comprehensive, and include data from the financial
reports. To answer this report you may need to look beyond the set readings and text.
Your report should range from 700 to 1,000 words. The marker reserves the right to
decline to mark answers over 1,200 words.
Please acknowledge sources used outside of the textbook and course materials.
References are not included in the word count. For information on referencing refer to the
Massey University Online Writing and Learning


Academic LevelCollege (3-4 years: Junior, Senior)
Subject AreaAccounting
Paper Type Research Questions
Number of Pages3 Page(s)/825 words
Paper FormatAPA
SpacingDouble spaced
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