The importance of cash to a business (Edexcel GCSE Business): Flashcards
📚Flashcards
Practise the cards
13 cards from this deck
ShowHide
Practise the cards
13 cards from this deck
What is cash described as in business?
What is cash described as in business?
The lifeblood of business operations
Definition of insolvent
Definition of insolvent
Unable to meet financial obligations
Definition of cash in business
Definition of cash in business
Actual money available immediately to pay debts & expenses
Definition of profit
Definition of profit
Calculated figure: total income vs total costs over time
Why profitable businesses can have cash problems
Why profitable businesses can have cash problems
Timing mismatch: recording sales vs receiving cash payment
Example of business with cash flow fluctuations
Example of business with cash flow fluctuations
Seasonal businesses e.g. ice cream vendors
Impact of holding too much inventory on cash
Impact of holding too much inventory on cash
Ties up money that could be used elsewhere
Receipts in cash flow forecast
Receipts in cash flow forecast
Money expected to come into the business
Payments in cash flow forecast
Payments in cash flow forecast
Money the business expects to pay out
What negative net cash flow means
What negative net cash flow means
More money leaving than coming in that period
Customer incentive to improve cash inflow
Customer incentive to improve cash inflow
Offer incentives for early payment
Supplier strategy to reduce cash outflow
Supplier strategy to reduce cash outflow
Negotiate longer payment terms
Key principle for cash flow challenges
Key principle for cash flow challenges
Act quickly before situation becomes critical