cash flow

Question 1

cash flow

Answer 1

the amount of money flowing into A business; the income and a flow out ; expenditure at any time. the lack of it causes a business to fail

Question 2

cash flow forecast

Answer 2

a statement showing the expected flow of money into and out of a business at a period of time.

Question 3

positive cash flow

Answer 3

more money coming in than there is out

Question 4

negative cash flow

Answer 4

more money coming out than there is going in

Question 5

what is the difference between cash flow and profit

Answer 5

profit- annual revenue

cash flow- what happens at a period of time

Question 6

limitations of cash flow forecast

Answer 6

seasonal business e.g. farmers may earn more money in certain times; more money goes in than out

the figures are always estimates

the price of goods and the cost of goods may change

forecast in the future may become less accurate.

Question 7

net cash flow

Answer 7

inflow- minus outflow

Question 8

closing balance

Answer 8

opening balance

+ net cash flow

Question 9

how to deal with outflow issues

Answer 9

cut cost

slow down outflow by delaying payments and arranging longer terms with suppliers

Question 10

how to deal with inflow issues

Answer 10

increase sales

speed up timing f inflows - shorter credit periods

use a debt factoring company

Question 11

how are cash flow forecast useful

Answer 11

helps to plan for the future

identifies when a business has surplus or a shortage of cash in order to plan on what do do.

to avoid cash flow issues

to set targets

to obtain finance

Question 12

break even

Answer 12

break even is when the total costs are equal to the total revenue. change in costs can affect it. no loss or profit is gained

Question 13

break even formula

Answer 13

10000/50- costs

Question 14

contribution

Answer 14

the amount per item that is left to pay fix cost and when the break even point is reach. this is also profit

price - variable cost

Question 15

margin of safety

Answer 15

actual sales - break even levels of sales

how much you are selling above the break even. and how much you can fall before it reaches break even

Question 16

improving break even

Answer 16

price- increase

cost- decrease

Question 17

Break even analysis

Answer 17

good for start up businesses - how many do I need to sell to make a profit.
helps to work out whether forecast sales will be enough to make a profit.
may help to get a loan from bank
see impact of changing costs and prices

Question 18

limitations to break even

Answer 18

forecast figures can be different from reality.
numbers of competitors may change
variables could increase
only works for one product
assumes all product are sold- some may be sold cheaper
it assumes fixed costs never change

Question 19

revenue

Answer 19

revenue-the income of a business

Question 20

break even -

Answer 20

where cost equal revenue and the business is making neither a lost or a profit.

Question 21

fixed cost

Answer 21

• costs that do not vary with out put.

Question 22

variable cost-

Answer 22

variable cost- costs that vary directly due to out put