Analysis of Cash Flow for a Small Business Assignment

Analysis of Cash Flow for a Small Business - Assignment Example Wallick (2009) on the other had states that in bigger businesses, there is a clear difference between EBIT and cash flow. The standard formula for EBIT that is applicable here is EBIT = Revenue – Operating Expenses (Investopedia). In the case of Charles, the various expenses, depreciation, and income had been given for the two years he was in business. Secondly Charles’ concern is his not generating enough income after investing two years in the business and he is contemplating to take a job that would pay him $40,000. Since he was in business for only two years and the second year was better than the first, the first area to look at will be the yearly percentage increase on Charles’ income and the following calculation will show that. The above calculation shows he had attained an increase of 160% commission growth in one year, because his client list has been growing. When that is the case, the likelihood is he will be getting more clients for the following year or at least he can retain a good portion of the existing client base, as long as he is in business. This will create three possible future scenarios where he might lose more or less than 10% of his commission if things start to go bad; he could earn the same amount of commission if the client list does not grow, or he could repeat the previous feat of 160% growth rate or even better. If he accepts the offer at the investment company that pays him $40000 before tax and other deductions, by simply deducting the applicable expenses assuming that they will remain the same, at least for the first year considering that there is only one more year to go for the deprecation, the outcome will be the following. The $18500 is better than the $16000 he will get if his commission income had decreased by only 10% and as the percentage of loss increases, it will end up making the $40000 a better offer. However, if his commission remained the