B.9 Cash Flow Management Flashcards
The movement of money in and out of a business or individual’s accounts over a specified period.
Cash Flow
The difference between cash inflows and outflows during a specific period; positive or negative.
Net Cash Flow
A financial report detailing cash inflows and outflows, categorized into operating, investing, and financing activities.
Cash Flow Statement
Cash generated or consumed by a company’s core business operations.
Operating Cash Flow
Cash used for or generated from investments in long-term assets or securities.
Investing Cash Flow
Cash inflows or outflows related to debt, equity, or dividends.
Financing Cash Flow
Non-essential expenses that can be reduced or eliminated without significantly impacting daily life.
Discretionary Expenses
Regular, consistent costs that remain the same, such as rent or mortgage payments.
Fixed Expenses
Costs that fluctuate based on usage or consumption, like utilities or groceries.
Variable Expenses
The percentage of income saved rather than spent; crucial for long-term financial health.
Savings Rate
A financial reserve set aside to cover unexpected expenses or income disruptions.
Emergency Fund
A strategy of prioritizing savings and investments before spending on other expenses.
Pay Yourself First
A measure of debt burden calculated as total monthly debt payments divided by gross monthly income.
Debt-to-Income Ratio (DTI)
A budgeting method where every dollar is allocated to a specific purpose, ensuring income equals expenses.
Zero-Based Budgeting
A budgeting guideline allocating 50% of income to needs, 30% to wants, and 20% to savings.
50/30/20 Rule
The amount of liquid assets held relative to monthly expenses, typically 3–6 months’ worth.
Cash Reserve Ratio
Occurs when income exceeds expenses over a given period.
Budget Surplus
Occurs when expenses exceed income over a given period.
Budget Deficit
The process of recording and monitoring spending to manage cash flow effectively.
Tracking Expenses
Extra funds beyond the emergency fund to cover additional unforeseen expenses.
Financial Cushion
A structured approach to paying off debts, often prioritizing high-interest debts.
Debt Repayment Plan
A savings strategy for planned future expenses, like vacations or large purchases.
Sinking Fund
Total income earned before any deductions.
Gross Income
Income remaining after taxes and mandatory deductions.
Disposable Income
Income left after paying for essential living expenses.
Discretionary Income
Income that is received regularly, such as a salary or rental payments.
Recurring Income
Unpredictable or non-consistent earnings, common in freelance or seasonal work.
Irregular Income
A flexible loan that allows borrowing up to a specified limit as needed.
Line of Credit
A system where a predetermined amount is automatically transferred to savings accounts.
Automated Savings
A budgeting method involving allocating cash into specific envelopes for different expense categories.
Cash Envelope System
