Cash flow forecast

Question 1

What is a cash inflow?

Answer 1

When a sum of money comes into the business

Question 2

What is a cash outflow?

Answer 2

When a sum of a money makes its way out of the business

Question 3

What is the break even point?

Answer 3

It is the point where the business’ revenue is equal to the total costs

Question 4

What are fixed costs?

Answer 4

They are costs which don’t change no matter how successful your business is

Question 5

What are variable costs?

Answer 5

They are costs that can change anytime and affect your business

Question 6

What are direct costs?

Answer 6

They are costs that are associated in the making of a product a business is trying to sell

Question 7

What are indirect costs?

Answer 7

They are costs that are not associated the the making of the products a business is trying to sell

Question 8

What is the formula for revenue?

Answer 8

Number of units sold x price per unit

Question 9

What are running costs?

Answer 9

Costs that continually need to paid during the time the business is running

Question 10

What are start up costs?

Answer 10

They are costs for products and items that are needed to start the business

Question 11

What is the formula for profit?

Answer 11

Revenue - total costs

Question 12

What is the margin of safety?

Answer 12

The amount by which sales would have to fall before the break even point is reached

Question 13

What is the formula for total costs?

Answer 13

Fixed costs + variable costs

Question 14

Name a benefit of a break even analysis?

Answer 14

It gives you an idea of how many products you need to sell in order to make a profit

Question 15

Name a limitation of a break even analysis?

Answer 15

If the business sells more than one product then the break even point can be hard to calculate as each product will be more/less popular than the others.

Question 16

What is budgeting?

Answer 16

Limiting how much money you are going to spend over a time limit by making a plan

Question 17

What is budgetary control?

Answer 17

when a business looks back at their plan/budget and compare it to your actual figures

Question 18

What is an adverse variance?

Answer 18

This is when the business does worse than its expected results

Question 19

What is a positive variance?

Answer 19

This is when a business does better than its expected results

Question 20

What is a cashflow forecast?

Answer 20

A cashflow forecast is a financial statement that plans future cash requirements and predicts when a business will have a deficit or surplus (negative or positive outcome) at the end of each month or year

Question 21

What is the formula for net inflow/outflow?

Answer 21

Cash inflows - cash outflows

Question 22

What is an opening balance?

Answer 22

How much money the business has at the start of a month

Question 23

What is a closing balance?

Answer 23

How much money the business has at the end of a month

Question 24

What is the formula for net profit?

Answer 24

Gross profit - expenditure

Question 25

What is the formula for gross profit?

Answer 25

Revenue - cost of sales

Question 26

What are the costs of sales?

Answer 26

The amount of money it takes to manufacture the product the business is selling

Question 27

What are expenses?

Answer 27

Money that a business has spent and owes

Question 28

What are assets?

Answer 28

things that a business owns

Question 29

What are liabilities?

Answer 29

things that a business owes

Question 30

What are current assets?

Answer 30

Things that a business owns for a short period of time and are expected to be converted to cash afterwards

Question 31

What are current liabilities?

Answer 31

Things that a business owes which need to be paid within a short period of time

Question 32

What is the formula for net current assets? (working capital)

Answer 32

Current assets - current liabilities