1.3.2 Cash & Cash Flow. Sources of Finance

For a future time period, a cash-flow forecast predicts :

• The profit or loss a business will make
• The break even level of output
• The money flowing into and out of the business
• The margin of safety

Which one of the following statements is true in relation to cash-flow and/or profit?

• Cash-flow and profit have the same meaning in business
• Businesses should always be more concerned about profit than cash
• The profit figure is always shown in the cash-flow forecast
• A positive cash flow is important to ensure business survival

A negative figure on the closing balance of a cash-flow forecast is called a:

• Surplus
• Profit
• Deficit
• Loss

The correct formula to calculate net cash flow in a cash-flow forecast is:

• Total cash inflows – total cash outflows in a given period
• Total cash outflows – total cash inflows in a given period
• Opening balance - closing balance
• Opening balance + closing balance

An extract from a business’ cash-flow forecast for March is shown in the table below: Based on this information, the opening balance for April will be:

• (£4,333)
• (£14,333)
• £109,641
• £119,641

Which one of the following is a reason why a business should construct a cash-flow forecast?

• It informs owners if the business is making a profit/loss
• It helps managers to prepare for any future cash shortfall
• It enables managers to calculate the break even point
• It enables the owners to assess past financial performance

A business has provided the following information for the months of September and October. Using the information provided in the table, which one of the following represents the value of total payments as a percentage of cash receipts in September?

• 24.73%
• 32.05%
• 41.82%
• 60.53%

An extract from a business’ cash-flow forecast for June and July is shown in the table below: Based on this information, the closing balance for July will be:

• £98,000
• £150,000
• £174,000
• £320,000

A business is experiencing cash flow problems. It currently has the following trade credit terms in operation with its suppliers and customers: Based on this information, which of the following would be a suitable way for the business to improve its cash flow position?

• Increase customer credit period and reduce supplier credit period
• Reduce customer credit period and increase supplier credit period
• Increase credit period with both customers and suppliers
• Reduce credit period with both customers and suppliers

Below is an extract from a business’s cash-flow forecast. Based on this information, the total receipts for January will be:

• £70,000
• £100,000
• £130,000
• £210,000