3.7 Cash Flow

Question 1

Define Cash Flow Forecast.

Answer 1

A prediction of future flows of money in and out of the business for a specific period of time.

Question 2

Difference between Profit and Loss Account and Cash Flow.

Answer 2

Profit and Loss measure the profitability of the business, while cash flow shows where money is coming from, going to, and how much cash you have on hand at a given point in time.

Question 3

Define Net Cash Flow.

Answer 3

Difference between inflow and outflow. (usually per month)

Question 4

Define Working Capital.

Answer 4

The money that a business has available for its operational activites; buy raw materials, and paying wages. Without it, business would be unable to operate and trade.

Question 5

List the Working Capital Cycle (4)

Answer 5

Cash in - Payments to suppliers/employees - Goods produced - Goods sold

Question 6

Working Capital in Balance Sheet = Net Current Assets

Answer 6

Working Capital = Current Assets - Current Liabilities

Question 7

Define Cash flow.

Answer 7

Money coming in and money going out of the business.

Question 8

Why cash flow fail: (3)

Answer 8

sales revenue are lower than expected, customers buy on credit (pay later), overstocking of items that do not sell well

Question 9

How to reduce cash OUTflow (3)

Answer 9

Improve trade credit from suppliers, leasing, holding lower stock

Question 10

How to improve cash INflow (3)

Answer 10

Improve marketing, overdrafts, sell fixed assets