30 - Forecasting and managing cash flows

Question 1

Define cash flow

Answer 1

the sum of cash payments to a business less the sum of cash payments from the business

Question 2

Define insolvent

Answer 2

when a business cannot meet its short-term debts

Question 3

Define cash flow forecasts

Answer 3

an estimate of the future cash inflows and outflows of a business

Question 4

Define cash inflows

Answer 4

cash payments into a business

Question 5

Define cash outflows

Answer 5

cash payments out of a business

Question 6

Define net cash flow

Answer 6

estimated difference between cash inflows and cash outflows from the period

Question 7

Define opening cash balance

Answer 7

cash held by the business at the start of the month

Question 8

Define closing cash balance

Answer 8

cash held by the business at the end of the month, which becomes next month’s opening balance

Question 9

Define credit control

Answer 9

monitoring of debts to ensure that credit periods are not exceeded

Question 10

Define bad debts

Answer 10

unpaid customers bills that are not very unlikely to ever be paid

Question 11

Define overtrading

Answer 11

expanding a business rapidly without obtaining all of the necessary finance, resulting in a cash flow shortage