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BTEC Business Studies Level 3 - Unit 3 - Personal And Business Finance > 5 - Cash And Cash Flow > Flashcards

5 - Cash And Cash Flow Flashcards

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1
Q

What is meant by “cash” in business terms?

A

Money a business can spend immediately

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2
Q

What is meant by “cash flow”?

A

Money coming in and out of a business

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3
Q

What is managed by cash flow?

A

Timings of cash transfers

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4
Q

What is meant by a “cash inflow”?

A

Cash coming into a business

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5
Q

What is meant by a “cash outflow”?

A

Cash going out of a business

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6
Q

What is the formula for a “net cash flow”?

A

Cash Inflows - Cash Outflows

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7
Q

What is meant by an “Opening Balance”?

A

The cash a business starts to trade with

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8
Q

What problem will a low opening balance create?

A

Liquidity problem

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9
Q

What is meant by a “Closing Balance”?

A

Cash a business finishes with after trading

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10
Q

What is meant by a “cash flow forecast”?

A

A business’s prediction of money coming in and out over a period of time

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11
Q

What will businesses estimate all the possible sources of in a cash flow forecast?

A

Cash inflows and outflows

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12
Q

In what 2 ways are cash inflows and outflows forecasted by a business?

A

Past data

Market research

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13
Q

Why is it important for businesses to forecast cash flows accurately?

A

To avoid liquidity problems

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14
Q

What is meant by a “liquidity problem”?

A

When a business runs out of cash in the short-term

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15
Q

What 2 things won’t a business be able to afford with a liquidity problem?

A

Rent

Wages

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16
Q

How can a business solve a liquidity problem?

A

Reduce cash outflows and increase cash inflows

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17
Q

What happens if a business has persistent negative cash flows?

A

It won’t be sustainable

18
Q

What 3 things won’t a business be able to pay for with negative cash flows?

A

Salaries
Rent
Raw materials

19
Q

Who does negative cash flow have a short-term consequence for?

A

Stakeholders

20
Q

Who won’t a firm be able to pay if it runs out of cash?

A

Its employees

21
Q

What will be negatively impacted if an employee is worried about cash? What might they leave?

A

Their employee motivation

The firm

22
Q

What is meant by “creditors”?

A

People or organisations who have loaned a business money

23
Q

Who won’t a business be able to afford to pay back if it runs out of cash?

A

Creditors

24
Q

What might businesses not be able to take out if it can’t pay creditors?

A

Loans

25
Q

What rates might increase if a business owes money to creditors?

A

Interest rates

26
Q

What happens if a business runs out of cash to pay suppliers with?

A

A temporary halt in production

27
Q

What relationship might be damaged if a temporary halt in production takes place?

A

Suppliers and the business

28
Q

What could a business reschedule to solve cash flow problems?

A

Cash payments

29
Q

How could a business delay a payment to suppliers?

A

Trade credit

30
Q

What payment could be delayed to suppliers with a positive cash flow?

A

Suppliers’ payment

31
Q

What problem can a business overcome by finding new sources of finance?

A

Liquidity problems

32
Q

What could be increased to increase cash inflows?

A

Sales

33
Q

Who could businesses chase up to increase cash inflows?

A

Customers who owe money

34
Q

What could a business sell to increase cash inflows?

A

Assets

35
Q

What can a business try to reduce to solve a liquidity problem?

A

Cash outflows

36
Q

What can a business delay to reduce cash outflows?

A

Payment of bills

37
Q

What are 2 ways a business can delay bill payments?

A

Change the dates

Secure trade credits

38
Q

Why are forecasts useful when a cash shortfall is predicted?

A

They can adjust their cash payments

39
Q

What do overdrafts allow for businesses to have in the short-term?

A

A negative current account balance

40
Q

What do banks provide to plug a short-term lack of cash?

A

“Bridging finance”

BTEC Business Studies Level 3 - Unit 3 - Personal And Business Finance (12 decks)

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