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11 Cards in this Set
- Front
- Back
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What’s cash flow |
If the movement of cash in and out of the business |
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Why cash is important to business |
This is because it’s essential to the business survival. Without it, they won’t be able to pay : - it’s employees wages - it’s suppliers of goods and services - other expenses such as rent |
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What does the business do to prevent a negative cash flow |
It’s needs an accurate forecast of the size and timing of cash inflows and cash outflow |
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What’s a cash flow forecast |
An estimate of the fire cash inflows and outflows of the business |
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Adv of cash flow forecast |
Enables the business identify any futur time periods where cash shortages may occur |
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What’s next cash flow |
Difference between cash inflow and outflow |
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What will happen if the business knows in advance there will be a period of cash shortage |
- it can delay the purchase of a non current asset 2) they can use another source of finance for the purchase of the non current asset. Such as leasing 3) it may arrange an overdraft if the cash shortage is in short term |
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How can a business overcome a short ten cash flow problem |
1) ask trade receivables to pay more quickly by offering goods and services 2) negotiate longer credit terms with suppler 3) delay purchase of non current asset until cash flow is improved 4) find other source of fiancé for the purchase of the non current asset |
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What’s working capital |
Is the capital needed to finance the day to day running expense and pay short term debts of a business |
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What does a working capital measure |
The liquify of the business |
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What’s liquidity |
The ability to pay short term debts |
