Chapter 31, Cash-flow and Working capital Flashcards
1
Q
Cashflow
A
the movement of money in and out of the business
2
Q
reasons for Cashflow forecasts and statements
A
- helps put into place strategies
- helps set prices
- determines payment periods
- looked at by potential investors
- evaluate business performance
3
Q
Opening Balance
A
the starting balance of a business
4
Q
Bank loan
A
loan from a bank
5
Q
total inflows
A
all inflows added up
6
Q
total outflows
A
all outflows added up
7
Q
Net Cash flow
A
cash inflows - cash outflows
8
Q
Closing balance
A
the final figure
9
Q
Limitations of Cashflow forecasts
A
- changes in the interest rate
- changes in economic policy
- Changes in the economic climate
- forecasts are estimates
- forecasting seasonal demand
- world events
- Competitors behaviour
- changes in technology
10
Q
Impact of Cashflow statements on a business
A
- they are used to measure performance
- Able to monitor the business by comparing forecast to statement
- lenders interests
11
Q
Causes of Cashflow problems
A
- Business environment (legislation)
- Excess stock
- Level of sales
- Late payments from debtors
- Paying creditors too quickly
- Over-trading
- Holding the right amount of cash ( working capital)
12
Q
Liquidity ratios
A
Best ways to assess the level of cash in the business
- Current ratio
- Acid Test
13
Q
Improving the cash flow of the business
A
- Increase sales
- Reduce stock levels by selling off stock or buying less stock
- Factoring (selling off the debts of the business)
- Leasing not buying
- Loans
- Changing creditor and debtor days
- Cut operating costs
