Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Business > 5.5 Cash and Cash Flow > Flashcards

5.5 Cash and Cash Flow Flashcards

(81 cards)

Start Studying
1
Q

What is net cash flow?

A

Total inflow of cash minus total outflow.

This metric helps assess the liquidity of a business.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is an opening balance?

A

The amount of cash available at the beginning of the month.

It is the closing balance for the previous month.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is a closing balance?

A

The amount of cash left at the end of the month.

It becomes the opening balance for the next month.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Why do businesses need cash?

A
  • To pay bills
  • To make purchases
  • To pay wages
  • To make social payments

Cash flow is essential for the daily operations of a business, ensuring all obligations are met.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is cash flow?

A

The movement of cash into and out of a business over a period of time.

Cash flow is crucial for assessing the financial health of a business.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

True or False: Cash flow is only about positive cash movements.

A

False

Cash flow includes both inflows and outflows of cash.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Fill in the blank: Cash flow is essential for _______.

A

[business operations]

It enables businesses to meet their financial commitments and sustain growth.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is positive cash flow?

A

When there is more money coming into a business than there is going out in a given period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is negative cash flow?

A

When there is more money going out of the business than there is coming in, in a given period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a common cause of cash flow problems?

A

Sensenalite - meren is mens moveing aro

This phrase appears to be unclear or possibly a typographical error, making it difficult to interpret the exact meaning.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Fill in the blank: A potential cause of cash flow problems is _______.

A

[los aer trans expenditure]

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

True or False: One cause of cash flow problems can be related to unexpected expenses.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Why is cash important for businesses?

A

Cash provides liquidity, enabling businesses to pay for short-term expenses and debts

Without cash, businesses cannot pay debts, repay loans, pay wages, buy materials, or promote their products.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is a cash flow forecast?

A

A statement showing the expected flow of money into and out of a business over a period of time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are examples of cash inflows?

A
  • Revenue from sales
  • Business notes
  • Raw materials
  • Interest received
  • Other income
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are examples of cash outflows?

A
  • Payments for raw materials
  • Equipment purchases
  • Rent or mortgage payments
  • VAT payments
  • Salaries
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is net cash flow?

A

The difference between total cash inflows and total cash outflows.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What does the opening balance represent?

A

The amount of cash available at the beginning of the period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What does the closing balance represent?

A

The amount of cash available at the end of the period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Fill in the blank: A business cannot survive without _______.

A

[cash]

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

True or False: Cash flow forecasts are only concerned with inflows.

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What happens if a business cannot pay its suppliers?

A

It may cause cash flow problems and damage relationships with suppliers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is the total inflow?

A

The sum of all cash inflows during a specified period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is the total outflow?

A

The sum of all cash outflows during a specified period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
What is the formula for net cash flow?
Net cash flow = Total inflows - total outflows
26
What is the formula for closing balance?
Closing balance = Opening balance + net cash flow
27
What is a cash flow forecast?
A prediction of the money expected to come in and go out of a business over a period of time. ## Footnote Cash flow forecasts help businesses manage their finances effectively.
28
On what basis are cash flow forecasts usually drawn up?
They are usually drawn up on a _______ basis. ## Footnote The specific basis was not provided in the text.
29
What do cash flow forecasts help a business to identify?
Months when cash outflows are likely to be greater than cash inflows. ## Footnote This identification allows managers to plan accordingly.
30
What can managers plan for based on cash flow forecasts?
How to deal with a period of negative cash flow. ## Footnote Planning is crucial to avoid financial difficulties.
31
Why do firms include cash flow forecasts in their business plans?
To obtain finance. ## Footnote Investors and lenders often require forecasts to assess the financial viability of a business.
32
What challenges do new businesses face regarding cash flow forecasts?
They may find it very difficult to make accurate predictions. ## Footnote New businesses lack historical data to inform their forecasts.
33
True or False: Cash flow forecasts are only useful for established businesses.
False. ## Footnote While established businesses may have more data, cash flow forecasts are also critical for new businesses.
34
What is the purpose of a cash flow forecast?
To estimate whether there will be enough cash to pay business expenses such as wages and rent. ## Footnote A cash flow forecast helps businesses anticipate cash inflows and outflows.
35
What are cash outflows?
Expenses that involve cash leaving the business, such as wages and rent. ## Footnote Cash outflows are crucial for understanding the financial health of a business.
36
What are cash inflows?
Monies coming into the business from various sources. ## Footnote Cash inflows can include sales revenue, investments, and loans.
37
Fill in the blank: A cash flow forecast shows the cash in the bank at the start of each month, the cash flows within the month, and the cash _______ by the end of each month.
expected
38
True or False: A cash flow forecast eliminates all financial uncertainties for a business.
False ## Footnote While it helps manage expectations, it cannot eliminate uncertainties.
39
What must be carefully estimated when creating a cash flow forecast?
Cash outflows and cash inflows. ## Footnote Accurate estimates are essential for a reliable forecast.
40
What are cash inflows?
Cash inflows are the money coming into a business, such as when customers pay for goods or services. ## Footnote Cash inflows can also include instances like the owner's withdrawals from a bank.
41
What are cash outflows?
Cash outflows are the money going out of a business, such as paying wages to staff and purchasing stock. ## Footnote Cash outflows represent the expenses that a business incurs.
42
What is net cash flow?
Net cash flow is the difference between total cash inflow and total cash outflow in any one month. ## Footnote Positive net cash flow indicates that inflows exceed outflows.
43
True or False: A business with negative cash flow may struggle to keep running smoothly.
True ## Footnote Negative cash flow occurs when outflows exceed inflows, which can jeopardize business operations.
44
Fill in the blank: Cash _______ are created when the business has to pay wages to its staff.
outflows
45
What might cause cash inflows for a business?
Cash inflows might occur when: * Customers pay for goods or services * The firm's owner takes out a bank loan ## Footnote Other potential sources could include investments or revenue from assets.
46
Why is it important to forecast cash flow?
To help the business plan for the future ## Footnote Forecasting cash flow allows businesses to strategize and prepare for upcoming financial needs.
47
What is one reason to forecast cash flow?
To identify when a business is likely to have a short fall or surplus of cash ## Footnote This helps businesses take necessary actions to manage their finances effectively.
48
What cash flow problem can forecasting help avoid?
Being unable to pay bills, wages, etc. ## Footnote Accurate cash flow forecasting can prevent financial crises by ensuring there are sufficient funds available.
49
How can cash flow forecasting assist in obtaining finance?
It shows the business has the cash to make repayments ## Footnote Lenders often require cash flow forecasts to assess a business's ability to repay loans.
50
What is a target that can be set through cash flow forecasting?
Reduce expenditure/increase income ## Footnote Forecasting enables businesses to set clear financial goals for improvement.
51
What is one limitation of cash flow forecasting?
The figures are only estimates ## Footnote Estimates may not reflect actual future cash flow due to various uncertainties.
52
How can changes in prices affect cash flow forecasting?
Prices of goods sold and cost of goods bought may change ## Footnote Fluctuating prices can lead to inaccuracies in cash flow projections.
53
What increases the accuracy of cash flow forecasting?
Based on past experience ## Footnote Historical data can provide a more reliable foundation for future forecasts.
54
What happens to the accuracy of cash flow forecasts the further ahead they project?
The less likely it is to be accurate ## Footnote Long-term forecasts are often subject to more variables and uncertainties.
55
Is negative cash-flow a problem?
It may be only temporary and not cause a problem for a business if they have financial plans in place ## Footnote Businesses with solid financial strategies can often manage temporary negative cash flow without severe consequences.
56
What can happen if a business has negative cash flow?
The business may need to delay payment of money owed, which may upset suppliers ## Footnote Delaying payments can damage relationships with suppliers and affect future transactions.
57
What impact can negative cash flow have on a business's operations?
The business may be unable to buy some equipment or new stock until its cash flow position improves ## Footnote This can hinder the growth and operational efficiency of the business.
58
When does negative cash flow become a serious problem?
If it continues for several consecutive months ## Footnote Prolonged negative cash flow can indicate deeper financial issues within the business.
59
What can be a consequence of prolonged negative cash flow?
May cause the business to go into liquidation ## Footnote Liquidation is a legal process where a business's assets are sold to pay off debts.
60
What is a cash flow shortage also known as?
Negative cash flow or cash flow deficit ## Footnote These terms are often used interchangeably in financial discussions.
61
List three strategies to solve a cash flow problem.
* Increase sales * Speed up timings of inflows * Cut costs ## Footnote These strategies can help improve cash flow by enhancing revenue and managing expenses.
62
What is one way to increase sales to address negative cash flow?
By using advertising, discounts, sales, or promotions ## Footnote These tactics can attract more customers and boost revenue.
63
How can a business speed up the timings of inflows?
By implementing shorter credit periods ## Footnote This encourages customers to pay sooner, improving cash flow.
64
What is one method to cut costs in a business?
Reduce staff hours or find cheaper supplies ## Footnote Cost-cutting measures can significantly impact overall expenses.
65
What does slowing down outflows involve?
Delaying payments and arranging longer credit terms with suppliers ## Footnote This can provide temporary relief in cash flow management.
66
What financial tool can a business arrange to manage cash flow issues?
An overdraft ## Footnote An overdraft allows a business to withdraw more money than is available in its account, providing short-term liquidity.
67
What is a debt factoring company?
A company that buys a business's receivables at a discount to improve cash flow ## Footnote This helps businesses access funds quickly without waiting for customer payments.
68
What should all businesses aim to maintain regarding cash flow?
A positive net cash flow position
69
What does negative net cash flow indicate about a business?
The business does not have enough cash coming in to pay for its cash expenses
70
What may a business need to apply for if it has negative net cash flow?
An overdraft
71
What is a downside of using an overdraft as a solution for negative cash flow?
It is expensive if used in the long term
72
A firm must ensure that cash _______ are larger than cash outflows.
inflows
73
What do businesses aim to achieve in the long term?
Profit ## Footnote Businesses aim to maximize profit over the long term.
74
What is more important for day-to-day operations of a business?
Cash ## Footnote Cash is essential for the daily running of a business.
75
What is the difference between cash and profit?
Cash refers to money held in notes and coins, as well as in bank accounts; profit is the revenue remaining after expenses. ## Footnote Cash is not the same as profit.
76
From where does cash come into a business?
Money received from sales of goods or services. ## Footnote This includes payments made by customers.
77
What is cash used for in a business?
To meet the firm's expenses ## Footnote Expenses include obtaining supplies, buying equipment, and paying wages.
78
What can happen if a business is unable to pay its bills?
It may be forced to close down. ## Footnote Cash flow problems can lead to business failure.
79
True or False: Thousands of businesses fail each year due to cash flow problems.
True ## Footnote Cash flow problems are a significant cause of business failure.
80
Fill in the blank: Cash is needed to pay _______.
bills ## Footnote Bills include all necessary expenses a business incurs.
81
Fill in the blank: Cash comes from customers who _______.
pay up ## Footnote Payment from customers is crucial for cash flow.

Business (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions