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Why is cash important to a business?
without cash a business is unable to pay wages, suppliers, and non-current assets
what does the survival of a business depend on?
cash inflow being larger than cash outflow
what is a “cash flow forecast”
an estimate of future cash inflows and outflows of a business
why is it better to have a positive cashflow?
negative cashflow can result in a business to borrow more money form external factors increasing debt
what does net cashflow mean
the total cashflow of a business
formula of net cashflow
cash inflow - cash outflow
how can a business improve cashflow (2)
reduce credit time, increase cash sales
what is the definition for '“working capital”
finance used to fund the day-to-day expenses of a business
What is the definition for “Liquidity”
the ability to pay short term debts of a business
what does working capital measure?
the liquidity of a business
what happens when a business doesn’t have enough working capital?
debt
how can business improve working capital? (3)
reduce inventory levels, negotiate longer credit terms, reduce credit time
how do you calculate working capital?
current asset - current liabilities
