Cash-flow forecasting and working capital 5.2 Flashcards
Why is cash important to a business
Cash is a liquid asset which is immediately available to spend on goods and services. Not having cash means you are experiencing a cash flow problem
What is cash flow and how do you find the net cash flow
The amount of money of going in and out of the business
Cash inflow - Cash outflow = net cashflow
How can a short term cash flow problem be overcome
Delaying payments
Asking debtors to pay more quickly
Bank loans to quickly get money
What is working capital
Capital (money) available for a business to pay for day to day operations
Working capital = current assets – current liabilities
What is the importance of working capital
Help pay employees wages and salaries
Pay debts
Ensure they have money for day to day operations
