Net cash flow

• What is the importance of cash flow in a business?

  It can prevent a business from failing
• What does cash flow represent in a business?

  Money movement in and out of a business
• What is net cash flow?

  Difference between cash inflows and outflows
• How is net cash flow calculated?

  Net cash flow = cash inflows – cash outflows
• What does the opening balance represent?

  Cash available at the start of the period
• What is the significance of cash flow forecasts?

  They help in planning and managing cash flow
• What does a positive net cash flow indicate?

  More cash is coming in than going out
• What does a negative net cash flow indicate?

  More cash is going out than coming in
• How can a business improve its cash flow?

  By increasing sales or reducing expenses
• If a business has a net cash flow of £2,550 in February, what does this imply?

  Cash inflows exceeded cash outflows
• Why is it important to differentiate between cash and profit?

  Cash flow affects liquidity, profit does not
• What can happen if a business has negative cash flow?

  It may lead to financial difficulties
• How would a business calculate its closing balance for February?

  Closing balance = opening balance + net cash flow
• What does the term 'cash inflow' refer to?

  Money received by the business
• What does the term 'cash outflow' refer to?

  Money spent by the business
• How can cash flow forecasts help a business?

  They assist in anticipating cash needs
• Why is it crucial for businesses to monitor cash flow?

  To ensure they can meet financial obligations
• What could be a consequence of poor cash flow management?

  Inability to pay suppliers or employees
• How does cash flow differ from profit?

  Cash flow is about liquidity, profit is earnings
• What strategies can a business use to improve cash flow?

  Increase sales, reduce costs, manage inventory
• If a business's cash inflows are consistently lower than outflows, what should it do?

  Review expenses and increase sales efforts
• What does a cash flow forecast help a business to do?

  Plan for future cash needs and expenses
• What is the relationship between cash flow and business sustainability?

  Positive cash flow supports long-term sustainability
• Why is it important for businesses to differentiate between cash and profit?

  To manage liquidity effectively
• How can a business ensure it maintains a positive cash flow?

  By regularly reviewing cash flow statements
• If a business has a net cash flow of £1,950 in March, what does this indicate?

  Cash inflows exceeded cash outflows
• What does a cash flow statement summarize?

  All cash inflows and outflows over a period
• What could be a long-term effect of poor cash flow management?

  Business insolvency or closure
• If a business's cash inflows are consistently lower than outflows, what should it do?

  Review expenses and increase sales efforts
• What is the role of cash flow in business operations?

  It ensures liquidity for daily operations
• How can a business improve its cash flow management?

  By implementing better budgeting practices
• Why is cash flow critical for business survival?

  It allows businesses to meet obligations
• What could be a consequence of having a negative cash flow?

  Inability to pay bills and suppliers