cashflow Flashcards
What is the equation for closing balance?
opening balance plus receipts minus payments=closing balance or
opening balance plus net cashflow
What is net cash flow?
Receipts minus payment
What is meant by the word receipts?
money coming into the business
Give four examples of receipts
sales from customers, sale of asset, grant, loan
What is meant by payments
money going out of the business
Give three examples of payments
rent, suppliers, electricity
how do you work out opening balance
it is the same as the previous months closing balance
Over what time period is a cash flow?
Over several months , six months or a year
What is the difference between a cash flow statement and a cash flow forecast
A statement is about what has actually happened and a forecast is a prediction about what they think will happen in the future
What is a cash flow forecast
its an estimate of how they think cash will flow into and out of the business
Why is cashflow important ?
It is a measure of the liquidity of the business, it show how able a business is to pay it’s bills on a regular basis/
Why is a positive balance needed?
So the business can pay it’s bills and continue to trade
How can you improve a negative cash flow
Try to get more money coming in then going out. Particularly to get debtors to pay you sooner and creditors to wait longer
What are debtors?
people who owe the business money
What are creditors?
people that the business owes money to,.
