1.3.3 Cash and cash flow

Question 1

Cash

Answer 1

The money a business can spend immediately
* ongoing expenses such as employees suppliers

Question 2

Profit

Answer 2

Can be spent on investments into other assets for the business

Question 3

Cash flow

Answer 3

The flow of all money into and out of the business

Question 4

Money flows in (cash inflows)

Answer 4

Product Sales

Question 5

Money flows out (cash outfows)

Answer 5

Pays wages or buys materials

Question 6

Net cash flow

Answer 6

Cash inflows - Cash outflows
* No problems in making payments but losing out on investments

Question 7

Cash flow forecast

Answer 7

Help firm anticipate problems
* List influent outflow of cash in the budget
* used to show if firms may face a lack of cash
Lack of cash~> Firms failing ~> unable to pay debts unless sells assets
. Forecast determines when it will need a short-term source of finance to cover costs

Question 8

Credit

Answer 8

Affirms cash they will change it if period of time increases

Question 9

How do credit terms affect cash flow?

Answer 9

How long after agreeing to buy a product to the customer has to pay
*effects timing of cash flow