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Business Studies AS Level (Josh H) > Improving cash flow > Flashcards

Flashcards in Improving cash flow Deck (6)
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1
Q

An entrepreneur had forecast that her business would have a cash balance of (£250,500) at the end of last month. Her opening balance was (£130,795) and her net cash flow for the month was (£111,425).
A) What was her cash balance at the end of the month?
B) Was it worse or better than she expected?

A

A) What was her cash balance at the end of the month?
(£130,795) + (£111,425) = (242,220)
B) Was it worse or better than she expected?
Better

2
Q

What causes cash flow problems?

A

Overtrading - business expands quickly without organising funds to finance the expansion
Allowing too much trade credit
Poor credit control - getting customers to pay on time
Inaccurate cash flow forecasting

3
Q

What causes variances?

A

One off occurrence, cancelled order
Seasonal variations
Trend - sales rising/falling steadily over a period of time
Self correcting - surge in demand followed by a slump

4
Q

How could cash flow be improved?

A
Improved control of working capital
Offer less trade credit
Arrange short term borrowing
Negotiate improved terms for trade credit
Debt factoring
Sale and leaseback
5
Q

How would profits be improved?

A

Reduce costs of production
Increase prices
Improve the business’s efficiency
Capacity utilisation
Reduce the number of substandard products
Improve methods of production
Eliminating unprofitable aspects of production

6
Q

Difficulties in improving cash flow and profit:

A

Identifying that there is a problem
Researching the cause of the problem
Coping with the issue - image
Decision making