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Cash Flow Key Definitions
· Opening Balance- Cash held by the business at the start of the month.
· Closing balance- Cash held at the end of the month- becomes next month's opening
· Bankrupt- This is when a business is insolvent and unable to pay their debts.
· Insolvent- When a business cannot meet its short- term debts.
· Liquidation- This is turning assets into cash and may be insisted on by courts if suppliers
have not been paid.
· Cash flow Forecast- Predicts money coming in and going out over a fixed period.
· Cash Inflows- money received from customer and other sources e.g-capital from the owner,
Bank loan and grant.
· Cash Outflows- money paid to suppliers' e.g- advertisement, electricity, wages and
· Cash flow analysis- The study of the cycle of your business cash inflows and outflows, with
the purpose of maintaining enough cash flow for your business.
· Receipts- Recording the expected total months by month's receipts.
· Payments- Recording the expected monthly expenditures by item.
· Net Flow- The difference between the receipt and the payments, giving an indication of
how much money is left at the end of each month
· Running balance- Keeping a running balance of the expected bank balance at the
beginning and the end of each month.
· Cash Flow- This is the money coming into a business from selling its products and the
money it spends on all part of production. Inflows- Outflows = Cash flow
· Cash flow statement- This is financial statement that shows how changes in balance
sheet accounts and income affect cash and cash equivalents, and breaks the analysis
down to operating, investing, and financing activities.