32 Cash flow

Question 1

Define cash flow forecast

Answer 1

cash flow forecast is used to show the estimated cash inflows and outflows of a business.

Question 2

Define cash inflows and outflows

Answer 2

cash inflows are the flow of money into a business.

cash outflows are the flow of money into a business.

Question 3

Define net cash flow and how is it calculated

Answer 3

net cash flow is the difference between the cash flowing in and the cash flowing out of a business in a given time period.

total cash inflows - total outflows

Question 4

Define opening balance

Answer 4

opening balance is the amount of cash that a business has at the beginning of the each month.

Question 5

Define closing balance and how is it calculated

Answer 5

closing balance is the amount of cash that the business expects to have at the end of each month.

net cash flow + opening balance

Question 6

Define solvency

Answer 6

solvency is the degree to which a business is able to meet its debts when they fall due.