Cash and Cash Flow Flashcards

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  • Make sure you understand the information on each card. If something's unclear, click the link to the revision notes at the bottom of the page for more details.

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Note: We may include questions that have multiple correct answers. It's useful to remember specific examples to understand these concepts better.

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What is cash in a business?

Cash is money the business can use now. It includes notes, coins, and money in its bank account.

What does cash flow mean?

Cash flow is the movement of money into and out of a business over time.

What is a cash inflow?

A cash inflow is money coming in, like cash sales and payments from customers.

What is a cash outflow?

A cash outflow is money going out, like wages, rent, stock, and bills.

How do you calculate net cash flow?

Net cash flow is total cash in minus total cash out for the period.

What is a cash flow forecast?

A cash flow forecast is a plan that estimates future cash inflows and outflows by month.

Why is cash important to a business?

It lets the business pay bills, wages, and suppliers on time. It helps the business survive.

Name two common causes of cash flow problems.

Late customer payments and holding too much stock.

In a cash flow forecast, what is the opening balance?

It is the cash at the start of the month. It equals last month's closing balance.

How do you work out the closing balance for a month?

Closing balance equals opening balance plus net cash flow. Example: £2,000 opening and minus £500 net gives £1,500 closing.

What does a negative net cash flow mean?

More cash is leaving than coming in that period. The business may struggle to pay bills.

Name two ways a business can improve its cash flow without borrowing.

Ask customers to pay sooner and reduce stock levels.