AS2 TP10

Question 1

how can cash flow be improved short and term long

Answer 1

selling assets not being used

looking at hire purchase/leasing instead out buying outright

extending the time to pay suppliers

Question 2

what are receipts

Answer 2

money coming into business

Question 3

what are payments

Answer 3

money going out the business

Question 4

what is net cash flow

Answer 4

difference between receipts and payments

Question 4

what is closing balance

Answer 4

money business has end end of the month = net cash flow + opening balance

Question 5

what are the reasons for cash flow problems

Answer 5

lack of planning
increased expenses
recession means falling sales

Question 6

how can bank loans improve cash flow

Answer 6

the bank guarantees to pay the business’ bills in form of an overdraft solving short term cash flow problems

Question 7

how can using hire purchase or leasing improve cash flow

Answer 7

would reduce expenditure payments when buying machinery

Question 7

how can reducing expenditure improve cash flow

Answer 7

business could decrease their inventory levels by reducing their monthly expenditure

Question 7

benefits of cash flow for-casting

Answer 7

ensures there is always ready money in business

good cash flow prevents business from having to take out loans

part of business plan giving business creditability

Question 8

limitation of cash flow forecasting

Answer 8

all figures in cashflow forecasting are predictions based on historical data so not entirely accurate

difficult to make predictions as doesn’t account for possibilities that can occur

expenditure can increase/decrease based on inflation rates, taxes which may be excluded from cash Flow forecast