Cash Flashcards
What is cash defined?
cash is money coming in and out of a business on a day to day basis
What are overheads?
are costs of a business that do not directly contribute to the cost of making the product or providing the service
Employees
if a business does not pay its employees in time they may leave and it will cost more money to recruit new people
Supplier
if a supplier is not paid on time then they may refuse the o deal wiht the company in the future
What is the equation for cash inflow (income)?
total revenue- unit of output x selling price per unit
What is opening balance?
brought foward from last month
What is closing balance?
carried foward to next month
What is cash outflow?
the cash that is being spent in the business known as expenditure
this will be on bills eg wages, advertising, overheads
What’s the formula for net cash flow?
inflows - outflows
What are the affects of a positive cash flow?
help the business keep their staff supplier and customers happy
What are overdrafts?
an overdraft is an agreement with the bank to allow the business to spend more than is in their account
What is interest rates?
the cost you pay to the lender for borrowing money to finance your loan on top of the loan amount or your principal
What is hire purchase?
a business pays for an expensive item each month little by little and on the final purchase the firm owns the equipment/ machinery
Pros of hire purchase
ideal way to purchase expensive equipment if bank will not loan money
payments can be spread over years which helps the business manage finance
Cons of hire purchase
can be very expensive compared to buying using a loan or wiht cash
