Business Accounts: Cash Flow Statement

Flashcards covering key concepts from the lecture notes on cash flow statements, including definitions, calculations, and components of cash inflows and outflows.

What is a cash flow statement?

A backward-looking statement that shows what happened to cash inflows and outflows, normally presented as part of a business's accounts.

Why is managing cash flow important, even for a profitable business?

A potentially profitable business may fail because it has cash flow problems.

What does the term 'receivable' mean?

Other businesses owe money to you.

How is net cash flow calculated?

Net cash flow = total inflows - total outflows.

What are some examples of cash outflows?

Payment of fixed costs, payment of variable costs, unforeseen expenses, and changes in payment terms (e.g., lender demands money back sooner).

What does the term 'payable' mean?

Paying another business at a later date.

How do you calculate the closing balance?

Closing balance = opening balance + net cash flow.

Where does the opening balance for a new period come from?

The opening balance will be the closing balance from the last month.