Business – 5.1 Business finance – The need for business finance | e-Consult
5.1 Business finance – The need for business finance (1 questions)
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Answer:
| Item | Amount (£) |
| Cash sales (receipts) | 10,000 |
| Cash operating expenses (payments) | 6,000 |
| Depreciation (non‑cash) | 2,000 |
| Cash flow | 10,000 – 6,000 = 4,000 |
| Profit (net income) | 10,000 – 6,000 – 2,000 = 2,000 |
The cash flow is £4,000 because depreciation does not involve an outflow of cash. The profit is £2,000 after deducting the non‑cash depreciation expense.