cash flow forecasting Flashcards
what is cash flow
flow of money into and out of a business
define insolvent
inability to meet debts
what is a cash flow forecast
a prediction of all receipts and payments over a period of time for the future
what does closing cash balance refer to
amount of cash that a business expects to have at the end of each month
what are cash inflows
money that is coming into the business
what are cash outflows
money that is going out of the business, such as tax and other expenses
define net cash flow
difference between cash inflow and outflow
why is cash considered important for a business
it is the easiest to be changed into money and indicates business success
what is one reason businesses need cash
to pay suppliers and other costs
what can happen if a business fails to pay suppliers
it can damage the relationship with suppliers, who may refuse to supply
how does insufficient cash affect a business
it can lead to business failure due to inability to pay outstanding debts
what is a key difference between cash and profit
cash may be less than profit if goods are sold on credit
what does cash flow forecast do
identifies cash shortages
how does a positive cash flow balance support funding applications
financial institutions are more willing to lend money
what role does cash flow forecasting play in business planning
it helps clarify aims and make improvements to the business
