Cash flow Flashcards
True or false - a negative cash flow means a business is making a loss.
False - a business with a temporary negative cash flow may still make a profit overall in the year.
What do figures in brackets represent?
Negative numbers.
True or false - balance carried forward is also known as closing balance.
True.
List three examples of income.
Sales revenue. Loan. Bank interest.
Describe how a business would have a positive cash flow.
If it has more money flowing into the business in one month than it has flowing out.
List three examples of expenditure.
Wages. Insurance. Stock.
Give three problems a negative cash flow may cause.
Payments to suppliers may have to be delayed. Purchases may not be able to be made until the problem is solved. High overdraft fees/charges may be charged.
Give three limitations of cash flow forecasting.
Prices/costs may change. Customer preferences may change affecting demand. Level of competition may change affecting demand. Estimated figures may not be accurate.
Define cash-flow forecast.
A statement showing the expected flow of money into and out of a business over a period of time.
Define income.
Money which a business receives.
State 3 reasons why businesses forecast cash flow.
To help plan. To identify shortages and take action. To provide sales targets for income.
Describe how a business would have a negative cash flow.
If it has more money flowing out of the business in one month than it has flowing in.
True or false - balance brought forward is the same as the closing balance of the previous month.
True.
Can a business have ‘too much cash?’
Yes - opportunity cost of cash not being utilised.
Is a negative cash flow a problem?
Not always - it may be a temporary problem the business can overcome.
