Cash Flow

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What is the definition of cash?
Cash is king - it is the lifeblood of a business, if business's do not have sufficient cash the business will most certainly fail
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What is the definition of cash flow?
Movement of cash in out of the business (inflows and outflows) during a particular time period. (e.g. week, month)
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What are cash inflows?
The movement of cash into the business during a particular time period (e.g. week or a month)
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What are cash outflows?
The movement of cash out of the business during a particular time period (e.g. week or month)
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Example of cash inflows?
The receipts from debtors, Interest on Bank Balances, Share Capital from Investors, Loans and Grants, Cash Sales
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Example of cash outflows?
Interest on overdraft and loans, Payments to suppliers, Tax from profit, Wages and Salaries, Dividends to shareholders
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What are the reasons of producing a cash flow forecast?
Advanced way of ensuring no cash shortages. Ensures business has enough cash to pay it's suppliers and employees. A reassurance to investors & lenders that business is managed properly. Helps spot problems with customer payments. Financial Control.
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Why is cash flow important?
It is a dynamic and unpredictable part of life for businesses, e.g. start-ups and small businesses. Cash flow problems main reason why business fails. Regular and reliable forecasting can address many of them problems
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Keys to effective cash flow forecasting
It is updated regularly. Makes sensible assumptions. Allows unexpected changes.
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What is a cash flow problem?
When a business doesn't have enough cash in order to pay its liabilities
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What are the common problems with cash flow forecasting?
Sales are lower than expected (overoptimistic about sales potential - gaps in market research). Customers don't pay up on time. Costs are higher than expected (purchase prices higher, business is inefficient). Imprudent cost assumptions
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Card 2

Front

What is the definition of cash flow?

Back

Movement of cash in out of the business (inflows and outflows) during a particular time period. (e.g. week, month)

Card 3

Front

What are cash inflows?

Back

Preview of the front of card 3

Card 4

Front

What are cash outflows?

Back

Preview of the front of card 4

Card 5

Front

Example of cash inflows?

Back

Preview of the front of card 5
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