C1 - Managing Cash Flows Flashcards Preview

AAT Cash & Treasury Management L4 AQ2016 > C1 - Managing Cash Flows > Flashcards

Flashcards in C1 - Managing Cash Flows Deck (15)
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1
Q

The importance of cash flows?

A
  • plan, monitor and control expenses
  • to produce budgets
  • to pay suppliers when they fall due
2
Q

Difference between cash flows and profit?

A
  • timing differences (accruals, tax and payables/receivables)
  • non cash items such as depreciation and goodwill
  • capital items such as dividends, acquisitions and loans
3
Q

Cash flow forecasting:

Increasing asset =

Increase liabilities =

A

Increase asset = decrease cash

Increase liability = increase cash

4
Q

Cash cycle:

5 steps:

A
  1. Inventory/materials
  2. Products or service
  3. Sale
  4. Trade receivables
  5. Cash received
5
Q

What is working capital?

A

The part of net resources of the business that is made up of current assets minus current liabilities

6
Q

4 cash cycle steps

A
  1. Inventory
  2. Receivables
  3. Cash
  4. Payables
7
Q

Meaning of liquidity

A

Managing the elements in the working capital cycle so that there’s enough resources available to meet the demands of the business.

8
Q

What does overtrading mean?

A

When a business attempts to expand its levels of trading and then has insufficient working capital and cash available to support the increased level.

9
Q

Warning signs of overtrading:

A
  • Increase in sales
  • falling profit margins
  • Increase in irrecoverable debts
  • longer receivable days
  • longer payment days
10
Q

What is overcapitalisation

A

When a business has more resources tied up in working capital than is needed.

11
Q

What is revenue receipts and payments

A

Receipts or payments of ongoing transactions within a company such as sales and purchases

12
Q

What is capital receipts and payments

A

A receipt or payment of an acquisition or sale of non current asset

13
Q

What is exceptional receipts and payments?

A

Receipts and payments of one off transactions which do not occur regularly

14
Q

What is a cash flow forecast?

A

A cash flow forecast is an estimated sum of money you expect to flow in and out of your business and includes projected income and expenses.

15
Q

Money invested into the business is shown as an increase or decrease when reconciling profit with cash (cash flow)

A

Increase