The capital needed to cover short term costs, and capital in day-to-day running costs. ACCOUNTING = current assets - current liabilities.
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Liquidity
A business's ability to cover their short term debts.
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Liquidation
When a firm ceases trading and its assets are sold for cash, normally to cover costs.
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Cash Inflows
The payments in cash RECEIVED by a business, from customers, banks (loans) or debtors.
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Cash Outflows
The payments MADE by the business, costs of spending - normally to workers, creditors or other outgoing sources.
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Debtors
Customers who have bought the products on credit (extended period to pay) and will pay cash after an agreed amount of time.
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Cash-flow Forecast
The forecast estimating the inflow and outflow of a firm's future cash movement, ADVANTAGE - predicts the business's performance. DISADVANTAGE - can potentially be inaccurate depending on the data given.
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Cash balances
Opening cash balance - cash held by a business at the start of the month. Closing cash balance - cash held at the end of the month, this becomes the opening cash balance of the next month.
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Credit control
Monitoring of debts to ensure that credit periods aren't exceeded.
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Overtrading
Expanding a business rapidly and without obtaining all of the necessary finance, so cash-flow shortage becomes a problem.
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Ways to improve Cash Flow
Increase the cash inflows or reduce cash outflows (cut costs)
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Causes of cash flow problems
1. Poor credit control. 2. Allowing too long for credit 3. Expanding too rapidly. 4. Unexpected events
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Other cards in this set
Card 2
Front
A business's ability to cover their short term debts.
Back
Liquidity
Card 3
Front
When a firm ceases trading and its assets are sold for cash, normally to cover costs.
Back
Card 4
Front
The payments in cash RECEIVED by a business, from customers, banks (loans) or debtors.
Back
Card 5
Front
The payments MADE by the business, costs of spending - normally to workers, creditors or other outgoing sources.
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