2.1.4 cash flow

Question 1

what is cash flow

Answer 1

cash flow is cash going in and out

Question 2

what is liquidity

Answer 2

the ability to convert an asset into cash without loss or delay

Question 3

what is net cash flow?

Answer 3

inflows - outflows

Question 4

what is opening balance

Answer 4

what is in the account at the start of the month.(the previous months closing balance)

Question 5

what is closing balance

Answer 5

opening balance + net cash flow

Question 6

what are the causes of cash flow problems

Answer 6

• credit sales(poor credit control)
• overtrading (increased capital expenditure)
• internal management (stock control)
• seasonality
• unexpected events

Question 7

how to improve cash flow

Answer 7

• increase cash inflows
• reduce cash outflows
• speed up timing of inflows
• slow down timings of outflows

Question 8

what are the possible causes of inaccuracy in cash-flow forecasts (know atleast 3)

Answer 8

• chages in consumer tastes
• inaccurate market research
• changing levels of competition
• unexpected changes of costs
• changes in levels of consumer spending in the economy

Question 9

3 limitations of cashflow forecasts

Answer 9

• predicted inflows and outflows may be inaccurate
• demand may be over/under estimated
• affected by the external environment which is outside of the entrepreneur’scontrol(eg a new competitor opens)