5.2 Cash flow forecasting and working capital (vocabulary)

Question 1

Define cashflow

Answer 1

The cash inflows and outflows of a business over a period of time

Question 2

Define cash inflows

Answer 2

The sums of money received by a business during a period of time

Question 3

Define cash outflows

Answer 3

The sums of money paid out by a business during a period of time

Question 4

Define cash flow cycle

Answer 4

This shows the stages between paying out cash for labour, materials, and so on, and receiving cash from the sales of goods

Question 5

Define net cash flow

Answer 5

The difference, each month, between inflows and outflows

Question 6

Define profit

Answer 6

The surplus after total costs have been subtracted from revenue

Question 7

Define cash flow forecast

Answer 7

An estimate of future cash inflows and outflows of a business, usually on a month-by-month basis. This then shows the expected cash balance at the end of each month

Question 8

Define closing cash balance

Answer 8

The amount of cash held by the business at the end of each month. This becomes next month’s opening cash balance

Question 9

Define opening cash balance

Answer 9

The amount of cash held by a business at the start of each month

Question 10

Define working capital

Answer 10

The capital available to a business in the short term to pay for day-to-day expenses

Question 11

Define forecast

Answer 11

This is an estimate of the future outcomes such as next year’s sales figures

Question 12

Define overdraft

Answer 12

This is the facility which enables firms to borrow up to an agreed maximum for any period of time that it wishes. This is a very flexible way of raising credit, which can fluctuate daily