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Flashcards in analysing financial performance: improving cash flow Deck (15):
1

what are payables?

the money a business owes to its suppliers and other short term creditors

2

what are receivables?

money owed to a business by its customers or debtors

3

what is a creditor?

those to whom a business owes money for goods or services that have been delivered but not paid for

4

what are debtors?

those who owe money to a business for goods or services that have been delivered but not paid for

5

define trade credit

when a supplier allows a customer to receive goods or services but pay for them later

6

what's credit control?

the process of monitoring and collecting the money owed to a business

7

what are bad debts?

payments that are long overdue and the firm cannot expect to be paid

8

what is overtrading?

this occurs when a business does not have enough cash to finance the purchase of raw materials and the production process

9

what is debt factoring?

obtaining part payment for a debt immediately which the factoring firm will then collect

10

define sale and leaseback

a contract that at the same time sells a property (the freehold) and then rents it back (the leasehold)

11

what are the 3 main purposes of a cash flow forecast?

- to anticipate potential shortages of cash
- examine and possibly adjust the timings of receipts and repayments
- to arrange financial support where problems are forecast

12

what are three main causes of cash-flow problems?

- allowing too much credit
- negotiating too little credit
- over-reliance on one or two customers

13

give three methods of improving cash flow problems

- regularly monitor and control cash through budgets and cash-flow forecasts
- short term loan
- secure an overdraft or increase existing overdraft

14

what would be a benefit and a limitation of using a bank overdraft to improve cash flow?

benefit- able to go over the banks money

limitation- interest rates after certain amount only

15

define cash flow

the continuous movement of money into and out of a business; the timing of revenue and costs