Cash Flow Flashcards
What is the definition of cash-flow forecast?
It is a key aspect of financial management of a business, planning its future cash requirements to avoid a crisis of liquidity.
What is the definition of inflow?
Money received by an organization as a result of its operating activities, investment activities, and financing activities.
What is the definition of outflow?
Money paid out by an organization as a result of its operating activities, investment activities, and financing activities.
What is the definition of net cash flow?
Net cash flow refers to the difference between a company’s cash inflows and outflows in a given period. In the strictest sense, net cash flow refers to the change in a company’s cash balance as detailed on its cash flow statement.
What is the definition of opening balance?
The opening balance is the first entry in a firm’s accounts, either when they are first starting up or at the start of a new financial year.
What is the definition of closing balance?
A closing balance is the amount remaining in an account within your chart of accounts, positive or negative, at the end of an accounting period or year end.
Why is cash flow forecasting important?
Cash flow forecasting is important because if a business runs out of cash and is not able to obtain new finance, it will become insolvent.
Where can you find the opening balance?
The opening balance can be found on the credit or debit side of the ledger, depending on whether or not the firm has a positive or negative balance.
List 4 examples of inflow
Sale of products
Interest on savings
Sale of assets, such as old machinery
Borrowed money, such as loans
Are inflows regular or irregular?
Inflows can be regular or irregular.
What are regular inflows?
Regular inflows are money that a business receives on a regular basis, such as monthly sales or annual interest.
When do irregular inflows happen?
Irregular inflows, like loans or the sale of assets, don’t happen all the time.
List 4 examples of outflow
Payments for stock or raw materials
Payment for equipment
Wages and bills
Loan repayments
Are cash outflows regular or irregular?
Cash outflows can be both regular or irregular
Are regular outflows easy to predict?
Regular outflows can be predicted
