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IGCSE Business Studies

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IGCSE Business Studies Cash Flow What is meant by cash flow? Cash flow is the flow of cash in and out of a business, over a period of time. Cash inflows are the sum ... – PowerPoint PPT presentation

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Title: IGCSE Business Studies


1
IGCSE Business Studies
  • Cash Flow

2
What is meant by cash flow?
  • Cash flow is the flow of cash in and out of a
    business, over a period of time.
  • Cash inflows are the sum of money received by a
    business over a period of time while cash
    outflows is the exact opposite.

3
Cash inflow
  • How can cash flow into a business?
  • By the sale of goods for cash
  • Through payments made by debtors
  • By borrowing money from external sources ( e.g.
    Loans)
  • Through the sale of assets if the business
  • From investors

4
Cash Outflow
  • How can cash flow out of a business?
  • By purchasing goods or materials for cash
  • By the payment of wages/ salaries to the
    employees
  • By purchasing fixed assets
  • By repaying loans
  • By paying creditors of the business

5
Cash Flow Forecasts
  • A cash flow forecast is an estimate of future
    cash inflows and outflows of a business, usually
    on a month by month basis. This will then show
    the expected cash balance at the end of each
    month.

6
Uses of cash flow forecast
  • There are many uses of cash flow forecasts, they
    are
  • Starting up a business
  • Keeping the bank manager informed
  • Running an existing business
  • Managing cash flow

7
Some common terms
  • Opening bank balance is the amount of cash held
    by the business at the start of the month
  • Net cash flow is the difference, each, month
    between the inflows and outflows
  • Closing cash balance is the amount of cash held
    by business at the end of the month, this becomes
    the next month opening bank balance.

8
What cash flow is not!
  • Cash and profit are two very different things.
  • Profit is the surplus after total costs have been
    subtracted from sales revenue and cash flow is
    not.

9
How to solve cash flow problems
  • Arrange with your bank to borrow money over the
    time when you have negative cash flow
  • Reduce or delay some of your planned expenses
  • Increase your forecasted cash income in some way(
    e.g. a part time job.)
  • Delay paying for some of your expenses until cash
    is available
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