paper 2 finance cash flow

Question 1

why does a business need cash flow

Answer 1

to pay expenses and short term debts eg rent wages bills

Question 2

what is liquidity

Answer 2

ability of business to turn assests into cash

Question 3

what is cash

Answer 3

money on premises or in bank to pay expenses

Question 4

what is cash flow forecast

Answer 4

predict what happens in future examples money flowing in and out

Question 5

what is profit

Answer 5

calculated by subtracting total cost of running the business from total cost of revenue

Question 6

what is cash flow

Answer 6

money coming in - sales
money going out - wages

Question 7

what is net cash flow

Answer 7

inflow-outflow

Question 8

what is opening balance

Answer 8

cash at the start of the month

Question 9

what is negative cash flow

Answer 9

more cash going out than coming in

Question 10

is negative cash flow always a problem

Answer 10

if temporary no - may need a temporary overdraft or delay paying a supplier
is a problem if it continues over a number of months

Question 11

why are cashflow forecasts useful (3)

Answer 11

use a s a planning tool
can anticipate periods of cash shortage
can enable to put in solutions for shortages