Finance- Cash Flow Flashcards Preview

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Flashcards in Finance- Cash Flow Deck (8)
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What is cash flow?

The movement of cash in and out of the business. It is central to the success and efficient operation of the business


Describe a cash flow diagram

Buy resources-> use resources to make goods and services-> sell goods and services to generate cash-> re-invest the cash into the business and continue the cycle...
(Drawn in a continuous circle)


What is cash inflow?

A movement of cash into the business
For example cash sales


What is cash outflow?

A movement of cash out of the business
For example cash purchases


What does a cash flow statement show?

The movements of cash in and out of the business over the course of the financial year.
The term 'cash' in this context can mean money in the back, or assets that can be converted quickly into cash if required (cash equivalent assets)


Give three examples of cash inflows

Sale of inventory
New capital invested


Give three examples of cash outflows

Loan repaid
Purchase of inventory


Why is a cash flow statement produced?

Produced by an organisation as part of its final accounts for the year.
It shows movements of cash over the past year.
It is a legal requirement for limited companies and most large organisations