managing Cash Flow

Question 1

What is overtrading

Answer 1

business expands too quickly
,cash flow cycle is too long

Question 2

What does allowing too much credit cause

Answer 2

Delayed inflows

Question 3

What does poor credit control cause

Answer 3

Delay inflows or customer may not pay at all

Question 4

what does inaccurate cash flow forecasting cause

Answer 4

Overestimating inflows or underestimating outflows

Question 5

methods of improving cash flow

Answer 5

• improve control of working capital
• negotiated improved terms of trade credit
• offer less trade credit
• debt factoring
• arrange short borrowing
• sale and leaseback

Question 6

examples of effective management of cash flow

Answer 6

1) reduced borrowing cost
avoid debt factoring
2) good relationships with suppliers
May offer discounts on price
3) public relations
avoids bad press