cash

Question 1

define cash

Answer 1

refers how much money the business has available to spend here and now

Question 2

what happens if a business runs out of cash

Answer 2

business can no longer pay bills and people they owe such as banks and suppliers

they are forced by the courts to pay the small amounts they owe so they need to sell non current assets such as land, machinery and buildings

As they have sold most or lots of what they won the business is unable to operate properly

Question 3

cash flow forecast

Answer 3

a financial tool that helps businesses estimate the amount of cash they expect to flow in and out of their bank account within a specific period. helps them see whether they will have sufficient cash to sustain its operations

Question 4

cash sale

Answer 4

when a customer immediately pays the business as they receive the good or service

Question 5

credit sale

Answer 5

the business receives the cash within a certain time period after selling the product

Question 6

trade credit

Answer 6

its b2b

when a business is given credit from their supplier

Question 7

why do a cash flow forecast

Answer 7

helps in making key decisions like if they have enough cash to pay the bills and if no they can look to see if they can reduce any outflows

Question 8

how to reduce cash outflows

Answer 8

• delaying cash outflows with trade credit
• cutting costs by having deals with suppliers

Question 9

how to increase cash inflows

Answer 9

-increase sales volume
-improve quality so they can increase price

Question 10

benefit and drawback of sales forecasting

Answer 10

gives an idea for stock management

however requires a lot of market research so expensive

Question 11

receivables and payables

Answer 11

receivables are customers that owe the business cash
payables are the people the business owes cash

Question 12

benefits and drawbacks of credit sale

Answer 12

differentiates the business so potentially more sales

if business gives too many they may not have enough cash to pay payables so will have to look for other finance

Question 13

benefits and drawbacks of trade credit

Answer 13

business can get materials or product and then make enough cash by selling it to pay back suppliers

if business misses payments their may be fines if included in contract and dampens relations with supplier