Cash flow

Question 1

What is a cash flow statement?

Answer 1

A cash flow statement is the actual cash in and cash out of the business over a set period of time.

Question 2

What is the equation for a net monthly cash flow?

Answer 2

Net cash flow= cash inflow - cash outflow

Question 3

what is a cash flow forecast?

Answer 3

A cash flow forecast, sets out the anticipated cash inflows and cash outflows over a set period of time in the future

Question 4

What are some causes of cash flow problems?

Answer 4

-overtrading
-stockpiling
-unexpected events e.g strike, machine breakdown
-increase cost raw materials
-poor credit control
-fall in demand
-timing of payments
-allowing too much trade credit

Question 5

What are some benefits of managing cash flow well?

Answer 5

-Reduced borrowing costs
-good relationship with suppliers
-public relations

Question 6

What is a long cash cycle?

Answer 6

a long cash cycle is when receivable days are longer than payable days so cash goes out before it comes in

Question 7

what is working Capital?

Answer 7

Working Capital is the money available for a business to carry out its day to day activities.
it is made up of cash plus those assets that can be turned into cash quickly e.g cash, debtors and stock

Question 8

What does the amount of working capital a business needs depend on?

Answer 8

-The Length of the production process, the longer it is the more working capital needed
-Delivery time- the longer it is the more working capital needed
-The credit given to customers, the longer the credit period the more working capital needed.