Chapter 31, Cash-flow and Working capital Flashcards Preview

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Flashcards in Chapter 31, Cash-flow and Working capital Deck (13)
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1
Q

Cashflow

A

the movement of money in and out of the business

2
Q

reasons for Cashflow forecasts and statements

A
  • helps put into place strategies
  • helps set prices
  • determines payment periods
  • looked at by potential investors
  • evaluate business performance
3
Q

Opening Balance

A

the starting balance of a business

4
Q

Bank loan

A

loan from a bank

5
Q

total inflows

A

all inflows added up

6
Q

total outflows

A

all outflows added up

7
Q

Net Cash flow

A

cash inflows - cash outflows

8
Q

Closing balance

A

the final figure

9
Q

Limitations of Cashflow forecasts

A
  • changes in the interest rate
  • changes in economic policy
  • Changes in the economic climate
  • forecasts are estimates
  • forecasting seasonal demand
  • world events
  • Competitors behaviour
  • changes in technology
10
Q

Impact of Cashflow statements on a business

A
  • they are used to measure performance
  • Able to monitor the business by comparing forecast to statement
  • lenders interests
11
Q

Causes of Cashflow problems

A
  • Business environment (legislation)
  • Excess stock
  • Level of sales
  • Late payments from debtors
  • Paying creditors too quickly
  • Over-trading
  • Holding the right amount of cash ( working capital)
12
Q

Liquidity ratios

A

Best ways to assess the level of cash in the business

  • Current ratio
  • Acid Test
13
Q

Improving the cash flow of the business

A
  • Increase sales
  • Reduce stock levels by selling off stock or buying less stock
  • Factoring (selling off the debts of the business)
  • Leasing not buying
  • Loans
  • Changing creditor and debtor days
  • Cut operating costs