Finance

Question 1

Preparing a cash budget should mean?…

Answer 1

Finance is better controlled and money is spent wisely

Business can see when cash flow problems arise

Decisions can be taken about the best time to make a big outlay of cash

Question 2

Why can cash flow issues occur?

Answer 2

Goods are being sold on credit, customers do not pay for their good straight away

Customers might take a long time to pay or might not pay at all

This can lead to cash flow problems because the company has to pay for the stock as well as extra expenses

Question 3

How can cash flow issues be resolved?

Answer 3

Raising additional capital

Taking out loans

Tight credit and stock control

Delay making payments

Spreading purchase costs

Question 4

Describe how you would produce a cash budget

Answer 4

Star with an opening balance

Then anticipate the money that is likely to be received and add this to the opening balance

All payments the business makes during the month are taken away

This is then the closing balance

Question 5

What is a cash budget?

Answer 5

A cash budget is a plan of how much money you have and how you will spend it