Cash Flow

Question 1

INFLOWS

Answer 1

£ arriving into the business (£ in)

Question 2

OUTFLOWS

Answer 2

£ leaving the business (£ out)

Question 3

CASH INFLOWS

Answer 3

£ IN

1) Cash and credit sales
2) Loan LT
3) Crowdfunding
4) Debentures
5) Venture Capital
6) Mortgages
7) Capital introduced
8) Sale of assets
9) Bank interest received

Question 4

CASH OUTFLOW

Answer 4

£ OUT

1) Cash and credit purchases
2) Rent
3) Rates–> council tax
4) Salaries
5) Wages
6) Utilities (electricity and gas)
7) Purchase of assets
8) Value added tax
9) Bank interest paid on loan

Question 5

FORMULA NET CASH FLOW

Answer 5

INFLOWS - OUTFLOWS

Question 6

OPENING BALANCE FORMULA

Answer 6

CLOSING BALANCE

1) ADD negative NCF
2) MINUS positive NCF

Question 7

CLOSING BALANCE FORMULA

Answer 7

OPENING BALANCE +/- NCF

Question 8

COST OF SALES FORMULA

Answer 8

OPENING STOCK+PURCHASES-CLOSING STOCK

Question 9

12 MARKS QUESTION EVALUATE

Answer 9

SUGGESTIONS+BAD OR GOOD WITH EACH SUGGESTION

Question 10

CASH FLOW ADS AND DISADS

Answer 10

Benefits
1) Planning for the future-can make better decision
2) Target setting for the future
3) Required by investors if seeking a loan/finance
4) Can identify where/when additional finances may be required
5) Monitoring performance- can identify when financial support is needed
Limitations:
1) It is only a prediction
2) Predicted inflows or outflows may be incorrect
3) Inflows or outflows may change depending on external factors

Question 11

WAYS TO IMPROVE CASH FLOW

Answer 11

1) Reduce unnecessary expenses
2) Set targets to avoid cash flow issues
3) Request extension of bank overdraft
4) Encourage suppliers to offer credit extension
5) Raise prices