Cash Flow and Budgets

Question 1

Define cashflow

Answer 1

The net amount of cash and cash-equivalents being transferred into and out of a business

Question 2

Define budget

Answer 2

Is a plan for the future, quantified in volume or in monetary terms
(Note: it has to be prepared and agreed prior to the time - plan!)

Question 3

Define overdraft

Answer 3

Is a short term unsecured loan

Question 4

What is a credit card?

Answer 4

Is a unsecured loan

Question 5

Problems with overdraft

Answer 5

Is expensive and risky for business - have to ask for it

Question 6

What are the advantages of budgets?

Answer 6

Planning and control
Assigning responsibility 
Motivation
Promote forward thinking an identification of short-term problems
Identification of limiting factors

Question 7

What are the disadvantages of budgets?

Answer 7

Encourage inefficiency
Controllable and non-controllable may not be differentiated
Inflexibility
Behavioural factors
Cost of the budgeting process