Cash flow

Front

What does cash flow refer to?

Back

The movement of an organization's cash inflows and cash outflows.

Front

Why is cash flow important for a business?

Back

It is often used to measure the financial health of a business.

Front

What is sales revenue?

Back

The value of goods and/or services a business sold to customers, calculated using the formula: Sales revenue = Price x Quantity.

Front

How is profit calculated?

Back

Profit = Sales revenue - Total costs.

Front

Can a business have negative cash flow and still earn a profit?

Back

Yes, it is possible for businesses to experience negative cash flow even when they earn a profit.

Front

What is working capital?

Back

Cash or other liquid assets available to an organization for its daily operations.

Front

How is working capital calculated?

Back

Working Capital = Current Assets - Current Liabilities.

Front

What are current assets?

Back

Short-term assets of an organization that can be easily converted into cash.

Front

What is the current ratio?

Back

A short-term liquidity ratio used to calculate the ability of an organization to meet its short-term debts, calculated as Current ratio = Current assets / Current liabilities.

Front

What is the acid test ratio?

Back

A short-term liquidity ratio used to measure an organization’s ability to pay its short-term debts without selling any stock, calculated as Acid test ratio = (Current assets – Stock) / Current liabilities.