Chapter 12 How to improve cash flow Flashcards
Chapter 12
What is meant by Cash flow?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
The flow of cash into and out of a business
Chapter 12
What is meant by Cash inflows?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Money coming into the business, the majority of which will come from selling products to customers
Chapter 12
What is meant by t Cash outflows?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Money going out of a business, such as materials to produce their goods or services, rents, administration, tax and wages
Chapter 12
What is meant by Credit terms?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
How long before you have to pay your suppliers, or before your customers pay you for goods that have been exchanged. Usually 30 days, and an invoice asks for the money
Chapter 12
What is meant by Debtor period?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
The average time (usually in days) taken to collect the money from your customers
Chapter 12
What is meant by De-stocking?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Reducing the level of stocks in a business
Chapter 12
What is meant by Financial management?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Deliberately changing monetary variables like cash flows to achieve financial objectives such as improved cash flows
Chapter 12
What is meant by Leasing / renting?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Instead of buying a piece of machinery or equipment by investing large amounts of money up front, sometimes it is possible to pay monthly instead. However, the business does not own the machinery or equipment until it is paid for in full.
Chapter 12
What is meant by Trade credit?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Where a supplier gives a customer a period of time to pay for a bill (or invoice) for goods or services once they have been delivered
Chapter 12
What are the key aspects of financial management?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Controlling the finances of a business is called financial management. Changing cash inflows and outflows is one example of this.
Chapter 12
How can establishing more favourable credit terms with suppliers improve cash flow?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
More favourable credit terms with regards to suppliers, means having longer to pay your suppliers for the raw materials they have sold to your business.
This reduces the cash outflow in the short-term.
Chapter 12
How can establishing more favourable credit terms with customers improve cash flow?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
More favourable credit terms with regards to customers, means having them pay for the products you have sold them quicker.
This improves the cash inflow in the short-term.
Chapter 12
How can the practice of de-stocking improve cash flow?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
De-stocking can help the cash flow by gaining extra sales and reducing the levels of finished goods.
Chapter 12
Identify ways a business could improve its cash flow.
Edexcel 2BS01 Business Studies GCSE Unit 3.3
- Getting debtors to pay faster
- Getting creditors to wait longer for payment
- Overdrafts
- Loans
- Cutting costs
- Increasing sales
- Leasing computer equipment
- De-stocking
Chapter 12
Why is a strong cash flow is important to a business?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
- it may reduce the chance of failure
- it might allow them to pay bills when they are due
- It could reduce the need for an overdraft.
