Higher Business - Cashflow

Why do businesses produce cash flow statements?

• To show if they spent more than they got in in revenue

• To predict their inflows and outflows

• To see if they are going to make a profit

If a cash budget shows a positive closing balance, this means there is

• a surplus of cash

• a shortage of cash

If a cash budget shows a negative closing balance, the business can then arrange an _________ with the bank to allow them to access additional finance for a short period of time.

A cash budget allows t______ to be set for individual departments which helps to control spending

Businesses which do not manage their cash correctly can face the following consequences

• Inability to pay bills, easier access to loans, have to find a higher quality supplier

• Inability to pay staff wages, Increased interest payments on loans, risk of closure

• Having to switch to a cheaper supplier with a lower quality, purchasing new assets to produce products quicker

What is the correct term for the amount of cash a business has available at the start of the month?

• Revenue

• Inflows

• Opening Balance

What is the correct term for the amount of cash a business has at the end of the month

• Closing Balance

• Expenditure

• Outflows

Some businesses experience cash flow problems if the demand for their products is ________, meaning sales are high at some points of the year and low at others

Some businesses give their customers a long time to pay their bills. This is known as

• inventory costs

• drawings

• long credit terms

• expenses

To solve a cashflow problem, a business could change to a cheaper ________