3.5.4 Making financial decisions: improving cash flow and profits

• Cash flow allows a business to pay its bills and expenses on time.


  True
• Negative cash flow occurs when more money is going out than coming in
• Gross Profit is calculated by subtracting the cost of goods sold from sales revenue
• Order the key benefits of positive cash flow for a business:

  1️⃣ Allows a business to pay its bills and expenses on time

  2️⃣ Enables investment in growth and expansion

  3️⃣ Provides a buffer against unexpected costs or revenue shortfalls
• Negative cash flow occurs when more money is going out than coming in.


  True
• Sales revenue has a positive impact on cash flow
• What does prompt payment from customers improve?

  Accounts receivable
• Operating profit measures profitability after accounting for operating costs.


  True
• Capital expenditures are a source of cash outflows
• Leasing assets instead of buying them reduces capital expenditures
• Gross profit measures the profitability of core business activities.


  True
• Match the cash inflow strategy with its effect on cash flow.

  Improve sales and marketing ↔️ Increases sales revenue

  Offer early payment discounts ↔️ Encourages prompt payments

  Lease assets instead of buying ↔️ Reduces capital expenditures
• Businesses can negotiate better terms with their suppliers
• Gross profit is calculated as sales revenue minus the cost of goods sold
• Effectively managing cash flow factors helps a business maintain financial stability
• Positive cash flow indicates that more money is coming in than going out


  True
• Gross profit measures the profitability of core business activities
• Match the cash inflow source with its description:

  Sales revenue ↔️ Money received from customers

  Loan proceeds ↔️ Money borrowed from lenders

  Investment ↔️ Money received from investors

  Asset sales ↔️ Money received from selling assets
• Understanding cash inflows and outflows is crucial for maintaining positive cash flow


  True
• Implementing cash flow strategies can help businesses achieve financial success


  True
• Improving sales and marketing efforts is a strategy to increase cash inflows


  True
• To improve cash flow and profits, businesses can implement strategies to increase cash inflows and reduce cash outflows
• Utilizing debt financing judiciously is a strategy to increase cash inflows
• Match the cash outflow strategy with its purpose:

  Negotiate better supplier terms ↔️ Reduce the cost of goods sold

  Optimize inventory levels ↔️ Decrease storage and holding costs

  Implement cost-cutting measures ↔️ Lower operational expenses

  Delay non-essential expenditures ↔️ Preserve immediate cash flow
• Budgeting provides a financial roadmap and aids in resource allocation
• Regularly evaluating and adjusting pricing is key to optimizing revenue
• Cash flow enables investment in growth and expansion
• A buffer against unexpected revenue shortfalls is provided by positive cash flow.


  True
• Net Profit measures overall profitability after all expenses are deducted.

  True
• Cash flow refers to the movement of money in and out of a business.

  True
• Cash flow allows a business to pay its bills and expenses on time
• What impact do expenses have on cash flow?

  Negative
• Delayed payments to suppliers negatively affect cash flow
• What is a primary source of cash inflows for a business?

  Sales revenue
• What is an example of a cash outflow for a business?

  Taxes
• What is a strategy to delay non-essential expenditures?

  Reduce cash outflows
• Operating profit is calculated by subtracting operating expenses from gross profit
• To improve cash flow and profits, businesses can implement strategies to increase cash inflows and reduce cash outflows
• Optimizing inventory levels is a strategy to reduce cash outflows


  True
• Operating profit measures profitability after accounting for operating costs

  True