Unit 3.7 Flashcards
Go to haiku to practice cash flow forecast
What is the difference between cashflow and profit?
Profit is defined as revenue less expenses. It may also be referred to as net income.
Cash flow, on the other hand, refers to the inflows and outflows of cash for a particular business.
What is the working capital cycle
There is a period of time from buying inputs to receive cash for sale
Working capital is how much is needed in this time
Cash flow forecast
Example: (Monday)
Opening balance 100
Cash inflow
Debt 50
Sell phone 100
Total cash inflow 150
Cash outflow
Shopping 80
Cinema 20
Present 100
Total cash outflow 200
Net cash flow -50 (150 - 200)
Closing Balance 50 (-50 + (100) opening balance)
Strategies for improving cashflows
Improving cash inflows
- Improve credit terms
- Increase cash sales
Reducing Cash Outflows
- Delay payments to creditors
- Delay spending on capital equipment
- Rent/lease rather than buy
- Cut unnecessary overheads
- Don’t pay staff