3.2.3
Cash & Cash Flow
Cash Flow
Cash Flow
Cash is the money that a business can spend immediately (it doesn't include money that a business owes or is owed). Cash flow is the amount of money that is coming in and out of a business and the timings of these cash transfers.


Cash inflows
Cash inflows
- Cash inflows is the cash coming into the business.


Cash outflows
Cash outflows
- Cash outflows is the cash going out of the business.


Net cash flows
Net cash flows
- Net cash flows is equal to cash inflows minus cash outflows.


Opening balance
Opening balance
- Opening Balance is the amount of cash that the business starts to trade with.
- A negative net cash flow may not create a liquidity problem if the business has a high opening cash balance.


Closing balance
Closing balance
- Closing balance – the amount of cash that a business finishes trading with.
Cash Flow Forecasts
Cash Flow Forecasts
Cash flow forecasts are a business’ prediction of how much money will come in and out of the business in a given amount of time.


Cash flow forecasts
Cash flow forecasts
- Businesses will estimate all the possible sources of cash inflows (e.g. sales) and cash outflows (rent, salaries, costs of production).
- They may be able to forecast these inflows and outflows using past data on sales and costs, as well as using market research.


Forecasting liquidity problems
Forecasting liquidity problems
- It is important for businesses to forecast this accurately to avoid liquidity problems.
- A liquidity problem is when a business runs out of cash in the short-term. They won’t have enough cash to pay rent and employees’ wages.
- To solve a liquidity problem, a business has to reduce (or delay) cash outflows and increase (or get sooner) cash inflows.
1Exploring Business
1.1Features of Business Organisations
1.2Organisation of Businesses
1.3Business Environment
1.3.1External Influences
1.3.2Political & Legal Change
1.3.3Economic Environment
1.3.4Social & Technological Environment
1.3.5Lifestyle & Technological Environment
1.3.6Corporate Social Responsibility
1.3.7The Competitive Environment
1.3.8Innovation
1.3.9Risk & Uncertainty
1.3.10Porter's Five Forces
1.3.11SWOT Analysis
2Marketing Campaigns
2.1Marketing
3Business Finance
3.1Sources of Finance
3.2Financial Planning
3.3Financial Statements
4International Business
4.1Globalisation
4.2International Business
4.3International Economic Environment
4.4Factors Affecting International Business
5Principles of Management
5.1Management & Leadership
5.2Theories of Motivation
6Business Decision Making
6.1Business Principles & Practices
6.2Quality Management
6.3Human Resources
6.4Documents & Business Decisions
Jump to other topics
1Exploring Business
1.1Features of Business Organisations
1.2Organisation of Businesses
1.3Business Environment
1.3.1External Influences
1.3.2Political & Legal Change
1.3.3Economic Environment
1.3.4Social & Technological Environment
1.3.5Lifestyle & Technological Environment
1.3.6Corporate Social Responsibility
1.3.7The Competitive Environment
1.3.8Innovation
1.3.9Risk & Uncertainty
1.3.10Porter's Five Forces
1.3.11SWOT Analysis
2Marketing Campaigns
2.1Marketing
3Business Finance
3.1Sources of Finance
3.2Financial Planning
3.3Financial Statements
4International Business
4.1Globalisation
4.2International Business
4.3International Economic Environment
4.4Factors Affecting International Business
5Principles of Management
5.1Management & Leadership
5.2Theories of Motivation
6Business Decision Making
6.1Business Principles & Practices
6.2Quality Management
6.3Human Resources
6.4Documents & Business Decisions
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