Cash, sales and purchases - page 37 Flashcards
1
Q
Cash
A
This is the liquid assets of the enterprise
2
Q
How is cash generated?
A
Mainly generated by sales
3
Q
How can cash be used?
A
To make purchases in order for the business to operate
4
Q
Liquid assets
A
- Invoices (debtors) expected to be paid within a few days
- Products that can be sold easily
- Notes and coins in the till
- Money in the Enterprise’s bank account- its bank balance. This may included an overdraft or loan
5
Q
Importance of liquid assets
A
Liquidity is a measure of an enterprise’s ability to convert its assets into cash. Cash is the most liquid asset.
6
Q
Purchases
A
An enterprise needs cash to make purchases in order for the business to operate smoothly
7
Q
Examples of purchases
A
- Raw materials required to produce goods for sale
- Expenses such as wages and salaries, heating and lighting, insurance and marketing
- Business equipment such as machinery, office equipment and computers
8
Q
Sales
A
Sales of goods and services is the main source of cash for most enterprises
