Topic 1.3.3 Cash and cash flow

Question 1

Difference between cash and profit?

Answer 1

Not all cash coming into the business is kept it is reinvested into the business to pay for bills and other overheads.
Profit is money the business or the business owner gets to keep

Question 2

The importance of cash to a business?

Answer 2

-Paying supplier or overheads
-Employees wages,bill of the business,overheads
As a result prevents business failure(insolvency)-the inability to pay bills in cash when they become due.

Question 3

What are Cash inflows?

Answer 3

Cash inflows-Money coming into the business e.g revenue

Question 4

What are Cash outflows?

Answer 4

Cash outflows-Money going out of the business
e.g rent,bills

Question 5

What is the formula for net cash flow?

Answer 5

Net cash flow=Cash Inflows-Cash outflows

Question 6

What is the formula for opening balance?

Answer 6

Opening balance=Closing balance of previous year

Question 7

What is the formula for closing balance?

Answer 7

Closing balance=Opening balance+net cash flow