cash flow Flashcards
what does a cash flow refer to?
to the money coming into the enterprise each day - its inflows
what happens when the money is leaving the enterprise?
it’s outflows
what will depend if it will either have a positive or negative liquidity?
on whether the enterprise has greater inflows or outflows of cash over a period of time
cash inflows and outflows:
what are considered as cash flows?
payments from customers
cash inflows and outflows:
what is an example of a cash outflow?
When an enterprise pays a bill
cash inflows and outflows:
what is the difference between outflows and inflows?
is the amount of cash in the enterprise - this is its net cash flow
cash inflows and outflows:
why does an enterprise needs to know how much cash is flowing in and out and its net cash flow?
so that it can ensure it has sufficient money to cover purchases and other running costs such as wages, rent and any monthly loan repayments
what are 6 examples of inflows?
1. revenue from?
2. owner’s ?
3. what is introduced?
4. what type of loans?
5. rent from?
7. what type of assets?
- Revenue from sales of goods and services
- Owner’s capital
- Capital introduced, for example money
from family and friends or from additional investors such as oharehoders - Bank loans
- Rent from property owned by enterprise
• Sale of assets
what are 9 examples of outflows?
- Raw materials for manutacture of goods
- Wages and salaries
- Heating, lighting and Power
- Fuel for vans
- Rent
- Insurance and business rates
- internet and phone charges
- Marketing
- Monthly loan repayments
how will an enterprise experience a positive liquidity?
if cash inflows over time are greater than cash outflows. It will have cash to pay for
purchases
how will an enterprise experience a negative liquidity?
if its cash inflows over time are less than its cash outflows. It will not have sufficient cash to pay for purchases
