Interpretation of Cash Flow

Question 1

Cash sale are falling

Answer 1

• could be caused by seasonal factors such as summer goods only being sold
• external factors may be impacting
Solution: marketing activities ie BOGOF etc

Question 2

Purchases are increasing

Answer 2

• business is tying too much money up in stock

Solution: Use just in time

Question 3

Expenses are increasing

Answer 3

• the business is paying increasing costs for expenses eg rising rent costs
Solution: switch to cheaper premises or e-commerce

Question 4

Negative closing balance

Answer 4

•their payments outweigh their receipts
• business left unable to pay off other debts and expenses
Solution: arrange more finance in the short term like a loan