It's money available to the business to cover costs usually in the form of money or bank deposits or assets that can be easily converted into money
1 of 11
Why is cash crucial to a business?
Because it can pay the bills when payments are coming in slowly and it is used to start-up a business before any profit is brought in
2 of 11
Why might businesses face cash flow problems?
Because in the short-term all up-front costs have to be paid before the long-term profit can take place so if businesses run out of cash, they have to cease trading and possibly lower their profit margins
3 of 11
What is a cash flow forecast?
It is a statement over time of the cash entering a business from its sales and the cash leaving a business to pay for its costs
4 of 11
Why is the net cash flow a crucial indicator for the business?
It indicates the ability of a business to cover its day to day running costs
5 of 11
What is cash inflow?
All cash sales, credit sales and any other money introduced during the month
6 of 11
What is cash outflow?
All payments made by the business during the month including overheads and variable costs
7 of 11
What is net cash flow?
The difference between cash in and cash out during the month
8 of 11
What is the opening balance?
The opening bank balance at the start of the month
9 of 11
What is the closing balance?
Net cash flow is added to show the bank balance at the end of that month
10 of 11
Why is cash flow forecasting important?
If the closing balance is negative then a business can prompt to seek extra finance, if cash flow problem can be foreseen then it may be possible to plan ahead to reduce payments going out ; advertising can be postponed or debtors may have to pay bac
11 of 11
Other cards in this set
Card 2
Front
Why is cash crucial to a business?
Back
Because it can pay the bills when payments are coming in slowly and it is used to start-up a business before any profit is brought in
Card 3
Front
Why might businesses face cash flow problems?
Back
Card 4
Front
What is a cash flow forecast?
Back
Card 5
Front
Why is the net cash flow a crucial indicator for the business?
Comments
No comments have yet been made