Causes of cash flow problems:

Cards (38)

  • Cash flow refers to the movement of money in and out of a business
  • Cash flow is important because it allows a business to avoid insolvency.

    True
  • Seasonal fluctuations can cause periodic cash shortages for businesses.
    True
  • What is an example of a cash inflow from loans or investments?
    Capital
  • What is an example of a cash outflow related to operational costs?
    Rent
  • Poor cash flow management can lead to the inability to pay bills on time.

    True
  • What is one reason why maintaining good cash flow is important for supplier relationships?
    Paying bills on time
  • What does avoiding insolvency ensure for a business?
    Financial distress prevention
  • What are loans and investments considered as in cash inflow?
    Capital
  • Overspending is a key cause of cash flow problems as it leads to more cash going out than coming in
  • Poor cash flow management can hinder a business's ability to invest in growth opportunities.
    True
  • What type of financing can businesses use to address temporary cash flow gaps?
    Loans or factoring
  • Implementing strict budgeting and expense controls can address the cause of overspending
  • By employing cash flow management strategies, businesses can maintain a healthy financial position
  • What is one common cause of cash flow problems related to customer payments?
    Late payments
  • What type of business growth can lead to cash flow problems?
    Rapid growth
  • Asset sales result in money coming into the business, which is a type of cash inflow
  • Repaying loans or lines of credit is a type of cash outflow
  • What is one growth-related opportunity that cash flow problems can prevent a business from pursuing?
    Expanding operations
  • Cash flow allows a business to invest in innovation and expansion.

    True
  • Cash inflow represents money coming into a business, while cash outflow represents money leaving.
    True
  • Operational costs include expenses like rent, wages, and utilities.
    True
  • Order the causes of cash flow problems from common to severe:
    1️⃣ Seasonal fluctuations
    2️⃣ Overspending
    3️⃣ Late payments
    4️⃣ Rapid growth
  • What is the worst-case scenario resulting from poor cash flow management?
    Insolvency and bankruptcy
  • Optimizing inventory levels and negotiating better payment terms with suppliers can improve cash inflows.

    True
  • Match the cause of cash flow problems with its management strategy:
    Late Payments ↔️ Use invoice factoring
    Overspending ↔️ Implement expense controls
    Seasonal Fluctuations ↔️ Secure short-term financing
    Rapid Growth ↔️ Manage inventory levels
  • Excessive spending on expenses can lead to a shortage of cash
  • Match the cash flow type with its definition:
    Cash inflow ↔️ Money coming into the business
    Cash outflow ↔️ Money leaving the business
  • Grants and subsidies are government support that contribute to cash inflow.

    True
  • Order the steps to address cash flow problems:
    1️⃣ Identify the causes of cash flow problems
    2️⃣ Analyze the impact of poor cash flow management
    3️⃣ Develop solutions to address cash flow challenges
  • Persistent cash flow problems can lead to insolvency and ultimately bankruptcy
  • Cash flow is the movement of money into (cash inflow) and out of (cash outflow) a business.crucial
  • Sales Revenue is income from selling goods or services
  • What is one key cause of cash flow problems related to customers?
    Late payments
  • What is one impact of poor cash flow management on relationships with suppliers?
    Inability to pay bills
  • Cash Flow Forecasting and Budgeting involves regularly forecasting cash inflows and outflows
  • What is one management strategy for addressing late payments from customers?
    Offer early payment discounts
  • What is one solution for improving cash inflows through inventory management?
    Negotiate better payment terms