Cash Flow

Question 1

What is cash flow

Answer 1

The total amount of inflows and outflows that a business faces especially as affecting liquidity.

Question 2

What is a cash flow forecast?

Answer 2

Predicted cash flow over the coming periods in time

Question 3

What is a cash flow statement

Answer 3

History of actual transactions which have taken place..

Question 4

How do you calculate cash flow

Answer 4

Net inflows - net outflows

Positive value means that the business is sustainable
Negative value means the business is unsustainable

Question 5

What is the purpose of a cashflow forecast

Answer 5

To know what is coming and what to expect.

Question 6

What is the purpose of cashflow statement

Answer 6

To reflect on prior performance and to allow you to focus on what needs improving

Question 7

What is the impact of cashflow on a business forecast

Answer 7

If their is a change in cashflow performance then there will be an impact on the forecast for the business.

Question 8

What are the advantages of using cashflow forecasts.

Answer 8

Highlights liquidity
Focuses and highlights big problems in the short and long run
Can prove that your business is unsustainable

Question 9

Disadvantages of a cashflow forecast

Answer 9

Cannot predict unforeseen events
Based on past data
Limited information to go off
It is an estimate.

Question 10

Advantages of a cashflow statement

Answer 10

Verify profitability and liquidity positions
Verify cash balance
Focuses on cash management
Planning and coordination
Superiority over accrual basis of accounting.

Question 11

Disadvantages of using a cashflow statement

Answer 11

Cash spending can be delayed
Growing companies can be penalised
Assumption based
Depreciation expenses may not reflect true cost.