1.3.3 - Cash & Cash-flow Flashcards
Putting a Business Idea into Practise
1
Q
What is insolvency?
A
The inability to pay bills when they come due
2
Q
Why is positive cashflow important?
A
- To prevent insolvency
- To pay suppliers, overheads and employees
3
Q
Give examples of cash inflows
A
- Revenue
- Overdrafts/loans
- Investments and sponsorships
- Interest on savings
4
Q
Give examples of cash outflows
A
- Total costs
- Dividends to shareholders
- Tax
- Loan/overdraft interest
5
Q
What is the formula for net cashflow
A
Cash inflows - cash outflows
6
Q
What is the formula for closing balance on a cashflow forecast?
A
(Opening balance + cash inflows) - cash outflows
7
Q
What is the difference between cash surplus and deficit?
A
Deficit - when outflow>inflow
Surplus - when inflow>outflow
