business flashcards page 20 - 25

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  • Created by: raaaaw
  • Created on: 05-04-20 13:23
what is cash flow
cash flow is the oney flowing in and out of a business on a day to day basis .
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what is a cash flow forecast
it predicts how cash will flow through a business over time .
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why is it useful
a business can use it to identify periods where it could have a cash flow problem
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what are inflows known as and examples
receipts would be like money from owners bank loans or cash from sales
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what are outflows known as and examples
payments would be like wages raw materials interest on loans advertising or bills
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net cash flow ?
negative or positive ( the inflows - outflows )
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opening balance ?
the amount of money in a business at the start of a month
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closing balance ?
the amount of money in the business at the end of the month
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how to calculate TOTAL receipts
net cash flow + total payments (outflows)
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how to calculate TOTAL payments
add up all the payments
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net cash flow ?
cash inflows - cash outflows
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opening balance ?
closing balance of previous period
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closing balance ?
opening balance + net cash flow
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what are the reasons to suggest the importance of cash
without sufficient cash the business willl become insolvent so it cant pay its suppliers and other debts repay bank loans pay wages to employees buy raw materials and products to sell promote the business
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what is cash ?
cash is the given amount of money that is available for a business to use to pay its debts
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what impacts on cash flow ?
a period of time or amount of money needed to pay a bill or invoice change in stock levels change in demand seasonality in sales (sun cream )
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a negative cash flow meaning ?
taht cash outflows are greater than cash inflows
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why a negative cash flow bad for the business ?
the business will have cash flow problems as it doesn't have enough cash cover its payments
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2 ways a business could improve their cash flow
increase revenue or negotiate lower prices with suppliers
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2 types of sources of finance
they can either be short term or long term
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reasons for finance ?
paying for expanses expanding the business, investing in new products and services
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short term sources of finance
sources of finance repaid immediatley or quite quickly usually within a year
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short term sources of finance used for what
for costs such as buying stock or paying utility bill
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long term sources of finance ?
usually repaid over a longer perid of time up to 25 years
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uses for long term sources of finance ?
used to finance a new business or to expand a business
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2 examples of short term sources of finance
bank overdraft or trade credit
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long term sources of finance examples ?
personal savings. venture capital . share capital . loan . retained profit . crowd funding
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what is a share ?
a share is part of ownership a business has
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quick note
a limited company can sell shares to potential investors to raise capital . these investors are then shareholders in the business and are entitled to a share of any profits generated
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what is crowd funding ?
process of raising small amouts of money from a large number of customers for a new project products or start up
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liabilty?
means the legal responsibility of a business towardss its debts
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unlimited liabilty
sole traders have this the owner is legally responsible for any debts of the business . so there is potential they can lose their personal belongings
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limited liability
the owners and the business are separate legal entities so any debts that the business has belong to the the business
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differnece between limited and unlimited is
unlimited liabilty there is more risk howver the owner has 100 percent control of decisions the owner keeps 100 percent of profits in unlimited l the owners accounts do not have to be made public
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Other cards in this set

Card 2

Front

what is a cash flow forecast

Back

it predicts how cash will flow through a business over time .

Card 3

Front

why is it useful

Back

Preview of the front of card 3

Card 4

Front

what are inflows known as and examples

Back

Preview of the front of card 4

Card 5

Front

what are outflows known as and examples

Back

Preview of the front of card 5
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