5.4 Forecasting and Managing cash flows

Question 1

Cashflow

Answer 1

The sum of cash payments to a business (inflows) minus the sum of cash payments (outflows).

Question 2

Cash inflow

Answer 2

Payments in cash received by a business such as those from debtors.

Question 3

Cash outflow

Answer 3

Payments in cash made by a business such as those to suppliers and workers.

Question 4

Insolvent

Answer 4

When a business cannot meet its short term debts.

Question 5

Cash

Answer 5

The money available for use at a certain moment in time. Cash can come from profit.

Question 6

Cashflow forecast

Answer 6

Estimate of a firm’s future cash inflows and outflows.

Question 7

Closing cash balance

Answer 7

Cash held at the end of the month and becomes next month’s opening balance.

Question 8

Credit control

Answer 8

Monitoring of debts to ensure that credit periods are not exceeded.

Question 9

Bad debt

Answer 9

Unpaid customers’ bills that are now very unlikely to ever be paid.

Question 10

Overtrading

Answer 10

Expanding, a business rapidly without obtaining all of the necessary finance so that a cash flow shortage develops.