3.2.1

Cash Flow

Test yourself on Cash Flow

Test your knowledge with free interactive questions on Seneca — used by over 10 million students.

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 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 peoples’ wages.
- To solve a liquidity problem, a business has to reduce (or delay) cash outflows and increase (or get sooner) cash inflows.

1

Business Activity & Influences on Business

1.1

Business Objectives

1.1.1Business Aims 1.1.2Business Objectives 1.1.3Business Objectives Change Over Time 1.1.4End of Topic Test - Business Aims 1.1.5Diagnostic Misconceptions - Profit

1.2

Types of Organisations

1.2.1Sole Traders & Partnerships 1.2.2Limited Companies 1.2.3Limited Liability 1.2.4Unlimited vs Limited Liability 1.2.5Not For Profit & Franchises 1.2.6Multinational Companies 1.2.7End of Topic Test - Business Ownership 1.2.8Application Questions - Business Ownership 1.2.9Diagnostic Misconceptions - Company vs Business 1.2.10Diagnostic Misconceptions - Owners vs Shareholders

1.3

Classification of Businesses

1.4

Decisions on Location

1.5

Business & the International Economy

1.5.1Globalisation 1.5.2Exchange Rates

1.6

Government Objectives & Policy

1.6.1Government Objectives 1.6.2The Government & Business Activity 1.6.3Interest Rates 1.6.4Interest Rates - Calculations 1.6.5Diagnostic Misconceptions - Recessions

1.7

External Factors

1.7.1External Factors

1.8

What Makes a Business Successful?

1.8.1Measuring Success 1.8.2Reasons for Failure

2

People in Business

2.1

Internal & External Communication

2.1.1Communication

2.2

Recruitment & Selection Process

2.2.1Types of Employment 2.2.2Recruitment Stages 2.2.3Effective Recruitment 2.2.4Legal Controls Over Employment 2.2.5Diagnostic Misconceptions - Internal Recruitment

2.3

Training

2.4

Motivation & Rewards

2.4.1Motivation in the Workplace 2.4.2Financial & Non-Financial Methods 2.4.3End of Topic Test - The Workforce 2.4.4Application Questions - The Workforce 2.4.5Diagnostic Misconceptions - Money

2.5

Organisation Structures

2.5.1Organisational Structures 2.5.2Centralised vs. Decentralised Structures 2.5.3Tall & Flat Organisations 2.5.4Functional Areas Within a Business 2.5.5End of Topic Test - Org Structure

3

Business Finance

3.1

Sources of Finance

3.1.1Internal & External Sources of Finance 3.1.2Factors Affecting Sources of Finance

3.2

Cash Flow Forecasting

3.2.1Cash Flow 3.2.2Consequences of Cash Flow Problems 3.2.3Cash Flow - Calculations 3.2.4Solutions to Cash Flow Problems 3.2.5Diagnostic Misconceptions - Cash Flow

3.3

Cost & Break-Even Analysis

3.3.1Costs, Revenue & Profit 3.3.2Profit, Average Unit Cost & Interest 3.3.3Costs - Calculations 3.3.4Revenue - Calculations 3.3.5Break-Even Analysis 3.3.6Profit & Losses - Calculations 3.3.7End of Topic Test - Finance 3.3.8Grade 9 - Finance 3.3.9Diagnostic Misconceptions - Fixed Costs 3.3.10Diagnostic Misconceptions - Break-even

3.4

Financial Documents

3.4.1Financial Statements 3.4.2Income Statement 3.4.3Understanding Business Performance

3.5

Account Analysis

3.5.1Business Calculations 3.5.2Gross Profit - Calculations 3.5.3Net Profit - Calculations 3.5.4Business Calculations 2 3.5.5Business Calculations 3 3.5.6Liquidity

4

Marketing

4.1

Market Research

4.1.1Market Research 4.1.2Forms of Market Research

4.2

The Market

4.2.1Customer Needs 4.2.2Satisfying Customer Needs 4.2.3Market 4.2.4The Competitive Environment 4.2.5Market Segmentation 4.2.6Market Mapping - Price vs Quality 4.2.7End of Topic Test - Marketing 4.2.8Application Questions - Marketing 4.2.9Diagnostic Misconceptions - Competition

4.3

The Marketing Mix

5

Business Operations

5.1

Economies & Diseconomies of Scale

5.1.1Economies of Scale 5.1.2Diagnostic Misconceptions - Economies of Scale

5.2

Production

5.2.1Production Processes 5.2.2Flow and Batch Production 5.2.3Production Efficiency 5.2.4Technology & Production 5.2.5Diagnostic Misconceptions - JIT vs JIC

5.3

Factors of Production

5.3.1Factors of Production

5.4

Quality

5.4.1Importance of Quality 5.4.2Identifying Quality 5.4.3Total Quality Management 5.4.4End of Topic Test - Operational Decisions

Jump to other topics

1

Business Activity & Influences on Business

1.1

Business Objectives

1.1.1Business Aims 1.1.2Business Objectives 1.1.3Business Objectives Change Over Time 1.1.4End of Topic Test - Business Aims 1.1.5Diagnostic Misconceptions - Profit

1.2

Types of Organisations

1.2.1Sole Traders & Partnerships 1.2.2Limited Companies 1.2.3Limited Liability 1.2.4Unlimited vs Limited Liability 1.2.5Not For Profit & Franchises 1.2.6Multinational Companies 1.2.7End of Topic Test - Business Ownership 1.2.8Application Questions - Business Ownership 1.2.9Diagnostic Misconceptions - Company vs Business 1.2.10Diagnostic Misconceptions - Owners vs Shareholders

1.3

Classification of Businesses

1.4

Decisions on Location

1.5

Business & the International Economy

1.5.1Globalisation 1.5.2Exchange Rates

1.6

Government Objectives & Policy

1.6.1Government Objectives 1.6.2The Government & Business Activity 1.6.3Interest Rates 1.6.4Interest Rates - Calculations 1.6.5Diagnostic Misconceptions - Recessions

1.7

External Factors

1.7.1External Factors

1.8

What Makes a Business Successful?

1.8.1Measuring Success 1.8.2Reasons for Failure

2

People in Business

2.1

Internal & External Communication

2.1.1Communication

2.2

Recruitment & Selection Process

2.2.1Types of Employment 2.2.2Recruitment Stages 2.2.3Effective Recruitment 2.2.4Legal Controls Over Employment 2.2.5Diagnostic Misconceptions - Internal Recruitment

2.3

Training

2.4

Motivation & Rewards

2.4.1Motivation in the Workplace 2.4.2Financial & Non-Financial Methods 2.4.3End of Topic Test - The Workforce 2.4.4Application Questions - The Workforce 2.4.5Diagnostic Misconceptions - Money

2.5

Organisation Structures

2.5.1Organisational Structures 2.5.2Centralised vs. Decentralised Structures 2.5.3Tall & Flat Organisations 2.5.4Functional Areas Within a Business 2.5.5End of Topic Test - Org Structure

3

Business Finance

3.1

Sources of Finance

3.1.1Internal & External Sources of Finance 3.1.2Factors Affecting Sources of Finance

3.2

Cash Flow Forecasting

3.2.1Cash Flow 3.2.2Consequences of Cash Flow Problems 3.2.3Cash Flow - Calculations 3.2.4Solutions to Cash Flow Problems 3.2.5Diagnostic Misconceptions - Cash Flow

3.3

Cost & Break-Even Analysis

3.3.1Costs, Revenue & Profit 3.3.2Profit, Average Unit Cost & Interest 3.3.3Costs - Calculations 3.3.4Revenue - Calculations 3.3.5Break-Even Analysis 3.3.6Profit & Losses - Calculations 3.3.7End of Topic Test - Finance 3.3.8Grade 9 - Finance 3.3.9Diagnostic Misconceptions - Fixed Costs 3.3.10Diagnostic Misconceptions - Break-even

3.4

Financial Documents

3.4.1Financial Statements 3.4.2Income Statement 3.4.3Understanding Business Performance

3.5

Account Analysis

3.5.1Business Calculations 3.5.2Gross Profit - Calculations 3.5.3Net Profit - Calculations 3.5.4Business Calculations 2 3.5.5Business Calculations 3 3.5.6Liquidity

4

Marketing

4.1

Market Research

4.1.1Market Research 4.1.2Forms of Market Research

4.2

The Market

4.2.1Customer Needs 4.2.2Satisfying Customer Needs 4.2.3Market 4.2.4The Competitive Environment 4.2.5Market Segmentation 4.2.6Market Mapping - Price vs Quality 4.2.7End of Topic Test - Marketing 4.2.8Application Questions - Marketing 4.2.9Diagnostic Misconceptions - Competition

4.3

The Marketing Mix

5

Business Operations

5.1

Economies & Diseconomies of Scale

5.1.1Economies of Scale 5.1.2Diagnostic Misconceptions - Economies of Scale

5.2

Production

5.2.1Production Processes 5.2.2Flow and Batch Production 5.2.3Production Efficiency 5.2.4Technology & Production 5.2.5Diagnostic Misconceptions - JIT vs JIC

5.3

Factors of Production

5.3.1Factors of Production

5.4

Quality

5.4.1Importance of Quality 5.4.2Identifying Quality 5.4.3Total Quality Management 5.4.4End of Topic Test - Operational Decisions

Practice questions on Cash Flow

Can you answer these? Test yourself with free interactive practice on Seneca — used by over 10 million students.

1
What is closing balance?Multiple choice
2
How can businesses solve liquidity problems?Fill in the list
3
What can businesses avoid by forecasting cash flow accurately?Multiple choice
4
How can businesses forecast cash inflows and outflows?Fill in the list

Answer all questions on Cash Flow

Unlock your full potential with Seneca Premium

Unlimited access to 10,000+ open-ended exam questions
Mini-mock exams based on your study history
Unlock 800+ premium courses & e-books

Get started with Seneca Premium

Factors Affecting Sources of Finance

Consequences of Cash Flow Problems