Using cash flow
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- Created on: 11-04-14 09:25
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- 3.3 Using cash flow
- Cash flow statements
- cash flow: the movement of money in and out of a business.
- Cash in: money that flows into the business.
- Cash out: money that flows out of the business.
- Cash flow statements
- a record of all the cash flowing into and out of the business.
- shows opening balance at the start of each month and closing balance at the end.
- Closing balance: cash available at the end of the month.
- Opening balance: cash available at the start of the month.
- Net cash flow: the difference between total cash in and total cash out.
- The importance of cash flow statements
- Businesses normally produce a forecast of their expected cash flow at the start of the year. this allows them to spot any potential cash shortfalls in advance.
- Identifies negative closing balance
- identifies positive closing balance
- Can help set targets for future years
- Monitor actual cash flow against forecast
- Solutions to cash flow problems
- Slow down money flow out of the business
- Reduce amount of money flowing out
- Speed up money flowing in
- Increase money flowing in
- Cash flow statements
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