Cash Flow

Question 1

Cash flow

Answer 1

The amount of money moving into and out of a business over a period of time.

Question 2

Receipts

Answer 2

Cash inflows to a business.

Question 3

Payments

Answer 3

Cash outflows from a business.

Question 4

Net cash flow =

Answer 4

Receipts - Payments

Question 5

Opening balance =

Answer 5

The value of the closing balance in the previous month.

Question 6

Closing balance =

Answer 6

Opening balance + Net cash flow

Question 7

Cash flow forecasting

Answer 7

An estimation of money moving into and out of a business over a future period of time.

Question 8

Advantages of cash flow forecasting

Answer 8

Enhances the planning process
Supports applications for funding
Timing of cash shortages and surpluses

Question 9

Cash flow statement

Answer 9

A financial statement that shows sources and uses of cash in a trading period.

Question 10

Liquid asset

Answer 10

An asset that is easily changed into cash.

Question 11

Cash flow problem

Answer 11

When a business struggles to pay its debts as they become due.

Question 12

Causes of cash flow problems

Answer 12

Overtrading
Too much stock (Stockpiling)
Investing too much in fixed assets
Allowing customers too much credit

Question 13

Improving cash flow

Answer 13

Cut costs
Cut stocks
Delay payments to suppliers
Cut back or delay expansion plans

Question 14

Improving cash flow forecasts

Answer 14

Accurate data
Effects of external factors
Manipulation of cash flow forecasts