Currently Flashcards
One way to improve cash inflows
Less credit sales eg pay back after lesss days (15 days instead of 30)
One way to improve cash outflows
Hire cheaper staff
Use less robust raw materials
Net cash flow formula
Inflows - outflows
What is the difference between cash and profit ?
Cash- how much money the business has to spend
Profit - how much money the business has left after the business has paid for certain costs
What happens when the business runs out of cash ?
Can’t pay bills
Or
(Can’t make payments to suppliers ,debt ,sell non current assets, dissrption in business operations)
Why does a business need cash ?
To pay for bills
Pay wages to worker
Credit sale
You are able to pay for a product by an agreed day (usually after 30 days)
How does a trade credit work ?
Business buys stock
Sells stock
Pays supplier for stock
Why would a business need to create a cash flow forecast ?
To predicts cash inflows and outflows
At certain times when net cash flow is negative they can manage cash inflows / oitflows
Purpose of a business plan ?
Raise finance
