Chapter 31- forecasting and managing cash flows Flashcards
1
Q
what is cash flow?
A
sum of cash inflows less sum of cash outflows
2
Q
what does insolvent mean?
A
when a business can not meet it’s short term debts.
3
Q
what is cash flow forecast?
A
estimate of firm’s future cash inflows and outflows.
4
Q
what are the uses of cash flow forecast?
A
- helps to identify problems before its too late
- helps to plan the timings of payments and reciepts
- bank services
- attract investors
5
Q
what are the limitations of cash flow forecasts?
A
- mistakes can be made in preparing them.
- unexpected change in prices can make them inaccurate.
- wrong assumptions can be made about sales by poor market research which will make forecast inaccurate.
6
Q
what are the causes of cash flow problems?
A
- lack of planning
- poor credit control (bad debts not identified)
- allowing customers long periods to pay up
- expanding too rapidly (overtrading)
- unexpected events.
7
Q
what is credit control?
A
monitoring debts to make sure that credit time period is not exceeded.
8
Q
how to improve cash flow?
A
- increase inflow
- reduce outflows
