Cashflow Details

Question 1

In what cases can a business be profitable but still have cash flow problems?

Answer 1

When the business makes a sale but is not able to collect the money in the expected time

Question 2

Formula for profit

Answer 2

Profit = Total revenue - Total costs

Question 3

Formula for net cashflow

Answer 3

Net cashflow = payments received - payments made

Question 4

Formula for working capital

Answer 4

Working capital = Current assets - Current liabilities

Question 5

Formula for closing balance

Answer 5

Closing balance = Opening balance + Net cash flow for the month

Question 6

Format of a cashflow forecast

Answer 6

Question 7

Accountaints make a cashflow statement in addition to cash flow forecasts, which records the actual cost inflows and outflows that took place in a period(T/F)

Answer 7

True

Question 8

Reasons for poor cash flow

Answer 8

-Poor stock management
-Poor pricing strategy or low sales
-Expanding too fast
-High expenses
-Seasonal demand

Question 9

Strategies to increase cash inflows

Answer 9

-Establishing effective debt collection systems
-Demanding cash transactions early
-Increasing promotion
-Expanding product portfolio
-Going public(with an IPO)
-Taking out overdrafts/loans
-Requesting grants and subsidies
-Sale of non-current(fixed) assets

Question 10

Strategies to reduce cash outflows

Answer 10

-Better stock management
-Renegotiate credit terms
-Switch to cheaper suppliers
-Reduce expenses
-Lease(instead of purchasing) equipment