Cash Flow Review 3.3

Cash

notes and coins available for immediate payment

Liquid asset

an asset, such as money held in a bank account, that is easily converted into cash.

Liquidity problem

not having enough liquid assets to convert to cash quickly.

Insolvency

inability to pay short term debts

Revenue

Money a business actually receives from the sale of goods and services.

Profit

The money that you keep after paying costs and expenses.

cash inflow

The money (real or virtual) actually going into the business

cash outflow

cash paid out by a business.

cash flow cycle

the continuous flow of cash into and out of a business over time.

Cash reserve

a holding of cash over and above what is needed to meet immediate payments. The reserve is held on the business premises or in an easy-access bank account

net cash flow

total cash inflows less total cash outflows per period.

Cash flow forecast

a projection of anticipated monthly cash inflows and outflows to estimate future cash requirements.

debtor

a customer that owes a business money for goods and services it purchased on trade credit.

positive working capital

exists when a business has sufficient money left over after it has paid its short-term debts to continue paying its day-to-day running costs. That is, the cash and other liquid assets held by the business exceed its current liabilities.