cash flow Flashcards
what is cash?
money that the business has available to it straight away, such as funds available in their bank account
what is forecast?
a technique where the business attempts to estimate future sales, cash flow or other financial variables
what is cash flow?
is the money that flows into and out of a business on a day-to-day basis
what is cash flow forecast?
a plan of the expected inflows and outflows to and from a business over a period of time
what is cash flow statement?
a record of the cash inflows and outflows that took place over an earlier period of time
what is the difference between cash and profit?
Profit is the extent to which a business’s revenues exceeds its total costs over some period of time, while cash is the money available there and then if they are to make a purchase in the day to day running.
what is net cash flow?
Net cash flow is the difference between the cash coming and going out of the business over a period of time
what is opening balance?
Opening balance is the cash the business has at the start of the month. It is also the closing balance from the previous month
what is closing balance?
Closing balance is the amount of cash the business has at the end of each month
what is income?
Receipts/income is the money is paid into the business during that month
what is payments?
Payments/expenditure is anything that the business spends that month
what are the two equations?
NET CASH FLOW = RECEIPTS - PAYMENTS
CLOSING BALANCE = NET CASH FLOW + OPENING BALANCE
what are the inflows:
Income from sales
Loans from bank
Money invested by the business’s owners
what are the outflows:
Buying materials Wages Rent or mortgage Interest on loans Taxes
What could cause cash flow problems?
Poor management
The business is making a loss
Offering customers to long to pay
