5.4a - Improving Cash Flow

Question 1

Why do businesses need profit in the long-term?

Answer 1

• Attract investors
• Expand
• Develop new products

Question 2

Why do businesses need profit in the short-term?

Answer 2

• Pay workers
• Pay shareholders
• Buy stock
• Pay bills

Question 3

How can cash flow issues be improved?

Answer 3

• Having a reliable cash flow forecasting system
• Actively managing working capital
• Choosing the right source of finance

Question 4

What makes a good cash flow forecast?

Answer 4

• It is updated regularly
• It makes sensible assumptions
• It allows for unexpected changes

Question 5

What does working capital management focus on?

Answer 5

• Customers paying on time
• Having an appropriate level of stock
• Getting maximum credit from suppliers