Unit 4.4 - cash flow Flashcards
Define cash flow statement
The money that has flown into and out of the business on a day to day basis
Define cash flow forecast.
Sets out the expected inflows and outflow over a period
Define cash inflow.
The money that comes into the business
Define cash outflow.
The money that goes out of the business
Define opening balance.
The cash available at the start of a trading period
Define closing balance.
The cash available at the end of a trading period
Define net cash flow.
The cash that goes through the business
What’s the net cash flow formula?
Cash inflow - cash outflow
Calculate closing balance.
Opening balance + net cash flow
Calculate opening balance.
It’s the closing balance from the previous period
How can a business improve cash flow? (7)
Change prices
Promote more
Reduce staff
Buy cheaper materials
Delay payments to suppliers
Chase debt owed by customers
Get a source of finance
Name the benefits of a cash flow to a business. (3)
Helps with planning
Supports attempts to raise finance
Assists in determining the viability or feasibility of a new business venture
What causes cash flow problems? (12)
Increased competition
Bad publicity
Changing buying habits from consumers
Economic changes, e.g. recession or lower disposable incomes
Government influences, e.g. increased taxation on certain products
Costs increase
The business is making a loss
Customers are given too long to pay
Late payment of debtors
Poor cash flow predictions
Bad debt
Poor budgeting and control of spending
