Finance Flashcards
What is cash flow?
The inflow and outflow of money over a period of time
Profit formula?
Total sales - Total costs
What is cash flow used for?
Day to day bills such as wages and electricity
What is profit used for?
To pay dividends and re-invest
Cash flow is short term, Profit is long term
True
Higher growth and expansion targets are an incentive to raise what in a business?
Revenue
Why might a company want to reduce costs?
Reduce prices to become more competitive
Increase profit
How can lower costs be achieved?
Cheaper suppliers
Improve productivity
How can revenue be increased?
Higher sales
Higher prices
How can a business improve cash flow?
Reduce credit given to customers to increase cash in
Break even formula?
Fixed costs / contribution per unit
Contribution per unit formula?
Selling price - variable cost per unit
What is the margin of safety?
The moment when a business begins to make a profit
Cash flow problems could occur from what?
Overtrading
Offering customers too much credit
Problems caused by poor cashflow?
Can’t pay short term debts
Struggle to pay suppliers
