Cash Flow Cover

Question 1

Cash flow cover, what it measures?

Answer 1

assesses liquidity using the actual cash that the business generate from its operating activities to meet financial obligations/short term debts

Question 2

increases when?

Answer 2

business is more likely to cover their current liabilities
- increases in net cash flows from operations
- decreases in average current liabilities

Question 3

decreases when?

Answer 3

business is less likely to cover current liabilities
- decrease net cash flows from operations
- increases in average current liabilities

Question 4

benchmarks

Answer 4

• previous reporting results
• budgeted results

Question 5

improvement strategies

Answer 5

• improve inventory turnover, accounts receivable turnover, to increase cash flows from operating activities
• purchase inventory on credit
• reduce current liabilities