cash flow-finance

• What is cash flow?

  The money flowing in and out daily
• What is turnover (revenue)?

  The value of sales or income
• How is turnover calculated?

  Selling Price × Quantity Sold
• What are the ways to improve cash flow position?

  • Reducing staff
  • Buying cheaper materials
  • Delaying payment to creditors
  • Chasing up bad debtors
  • Increasing promotions
  • Raising finance/selling assets
  • Increase/reduce price
• What is a consequence of reducing staff?

  It reduces the wages bill
• What is a potential downside of reducing staff?

  It may lead to inferior service
• How does buying cheaper materials affect cash flow?

  It reduces production costs
• What is a potential downside of buying cheaper materials?

  Customers may be unhappy with quality
• What does delaying payment to creditors allow a business to do?

  Use cash for other purposes
• What is a potential downside of delaying payment to creditors?

  Suppliers may refuse trade credit
• What is the benefit of chasing up bad debtors?

  It may generate cash
• What is a potential downside of chasing up bad debtors?

  It may cause cash problems for customers
• How can increasing promotions affect cash flow?

  It may lead to increased sales
• What is a potential downside of increasing promotions?

  It may be expensive to set up
• How can raising finance from a bank help cash flow?

  It generates cash for day-to-day bills
• What is a potential downside of raising finance from a bank?

  The money must be paid back
• How can increasing or reducing price affect revenue?

  It may lead to more revenue if sales don’t fall
• What is a potential downside of changing prices?

  Revenue may fall if customers decrease
• What is net cash flow?

  Predicted profit on a cash flow forecast
• How is net cash flow calculated?

  Total Inflow – Total Outflow
• What is the closing balance?

  Cash remaining at the end of a month
• How is the closing balance calculated?

  Opening Balance + Net Cash Flow
• What is the opening balance?

  Cash available at the start of a month
• What is a cash flow forecast?

  Expected inflows and outflows over time
• Why are cash flows important for a business?

  They help in planning and securing loans
• How can external events affect cash flow forecasts?

  They may change actual cash flow amounts
• What external event can increase taxes?

  Changes in government tax policy
• How do interest rates affect cash flow?

  They change the amount of cash given to banks
• How can legislation impact cash flow?

  It may change services offered and cash available
• How can weather affect cash flow?

  It changes the number of goods sold
• What can increase costs for a business?

  Wages, fuel, and other expenses
• How does inflation affect cash flow?

  It increases costs and reduces customers
• How does competition affect cash flow?

  It attracts customers away from the business
• What happens if equipment breaks?

  Fewer items to sell and repair costs
• What are common cash flow problems?

  Lack of working capital and profitability