Theme 2 Topic 8 - Planning Cash Flow

Question 1

Define Cash Flow

Answer 1

The movement of cash into and out of the business over a period of time

Question 2

Define Cash Flow Forecast

Answer 2

Estimates of a firms expected cash inflows and outflows over a period of time

Question 3

Net Cash Flow =

Answer 3

Total cash inflow - Total cash outflow

Question 4

Opening Balance =

Answer 4

Closing balance of the previous month

Question 5

Closing Balance =

Answer 5

Opening balance + Net monthly cash flow

Question 6

Define Trade Credit

Answer 6

A period of time given by suppliers before customers have to pay for goods or services

Question 7

What does it mean if a number is in brackets?

Answer 7

It is negative

Question 8

When do cash flow forecasts record the cash?

Answer 8

At the exact time it is estimated to enter or leave the bank account or till

Question 9

What are two advantages of cash flow forecasts?

Answer 9

Helps avoid unexpected cash flow problems, Supports loan application

Question 10

What are two disadvantages of cash flow forecasts?

Answer 10

It is only and estimate, Needs to be monitored regularly and updated

Question 11

What is one reason new businesses are particularly vulnerable to cash flow problems?

Answer 11

Suppliers demand immediate payment from newly established businesses who have not had time to develop a good record for paying suppliers