Chapter 12

Question 1

Cashflow

Answer 1

The difference between the money flowing in and the money flowing out of a business or household

Question 2

Cash-flow forecast

Answer 2

A document showing the difference between the money flowing in and the money flowing out of a business or household over a period of time

Question 3

Benefits of a cashflow forecast

Answer 3

Assist financial planning
Financial control
Loan requirements

Question 4

What to consider when applying for a loan

Answer 4

Is it realistic 
Any seasonal factors, e.g. Christmas
Credit - delay of payments
Any bad debts
Any taxes

Question 5

Short term source of finance

Answer 5

Credit purchases
Unpaid bills/accrued expenses
Bank overdraft
Factoring debts

Question 6

Medium termsource of finance

Answer 6

Hire purchase
Leasing
Term loan

Question 7

Long term source of finance

Answer 7

Home mortgages
Savings
Debentures
State grants
Sale and lease-back

Question 8

How should finance be selected

Answer 8

Purpose 
Amount
Cost
Control
Risk

Question 9

What a bank considers when applying for a loan

Answer 9

Purpose Amount of loan
Creditworthiness of the business
Ability to repay
Collateral available

Question 10

Trade Credit

Answer 10

Receiving goods from suppliers now and paying for them later