Using Cash Flow
Specification:
3.3 Using Cash Flow • interpreting simple cash flow statements • the importance of cash flow statements • identifying solutions to cash flow problems |
Candidates should be able to interpret simple cash flow statements.
Candidates need to understand the consequences of cash flow problems and that these could lead to the business going into receivership and closing down. Candidates should be able to recommend possible solutions to cash flow problems, such as re-scheduling payments and receipts of income. Candidates will not be expected to complete a cash flow statement. |
Cash Flow
Learning Objectives:
- To understand the components of a cash flow forecast/statement (D-E)
- To analyse the information and detect potential problems in a cash flow (B-C)
- To evaluate the cash flow of a given business (A*-A)
- To understand the components of a cash flow forecast/statement (D-E)
- To analyse the information and detect potential problems in a cash flow (B-C)
- To evaluate the cash flow of a given business (A*-A)
Starter Activity:
Cash flow is essentially money coming in and going out of the business. Inflow means money becoming available to the business, outflow is when the business makes a payment.
Where do you think money can come into the business from?
Where do you think money can leave the business from?
Where do you think money can come into the business from?
- Sales income (revenue)
- Loans from banks
- Owner's investment
Where do you think money can leave the business from?
- Setting up the business (what costs do you think they might incur?)
- Buying raw materials
- Wages
- Rent or mortgage
- Interest on loans
- Taxes (what taxes do businesses pay?)
A cash flow forecast (prediction) or statement (what has happened) is a table showing all the inflows and outflows of cash that are expected by a business. It can help you plan for the future or identify where the business could save money.
Below is a cash flow forecast, how well do you think this company is performing and why?
How do you think we work out:
Below is a cash flow forecast, how well do you think this company is performing and why?
How do you think we work out:
- Total income
- Total expenses
- Net cash flow
- Opening balance
- Closing balance
Activity: Please complete the cash flow forecast.
Extension: Exam paper question.
Plenary: Write down 2 benefits of using a cash flow forecast. Explain your answers.
Cash Flow Calculations: Please take a look at your cash flow buster worksheet.
cash_flow_buster1.doc | |
File Size: | 78 kb |
File Type: | doc |
What are the main calculations that we need to know for a cash flow forecast/statement?
Complete the cash flow buster worksheet.
Complete the exam paper question.
Complete the cash flow buster worksheet.
Complete the exam paper question.
Cash Flow Problems and Solutions
Learning Objectives:
- To understand the solutions to cash flow problems (D-E)
- To analyse the consequences of cash flow problems (B-C)
- To evaluate the different solutions to cash flow problems (A*-A)
- To understand the solutions to cash flow problems (D-E)
- To analyse the consequences of cash flow problems (B-C)
- To evaluate the different solutions to cash flow problems (A*-A)
Starter Activity:
You're a very generous young person who always helps out his friends but you're in a bit of a pickle now. You don't get paid until after the weekend, your bank balance is zero but your favourite band is playing tomorrow night and you desperately need to see this gig. List all the things that you could do to get yourself to that venue and rock out.
You're a very generous young person who always helps out his friends but you're in a bit of a pickle now. You don't get paid until after the weekend, your bank balance is zero but your favourite band is playing tomorrow night and you desperately need to see this gig. List all the things that you could do to get yourself to that venue and rock out.
How can using a cash flow help?
- Identify times when a business might be short of cash
- Take action to avoid cash shortages becoming a major problem
- Can help you when applying for loans
- Can show you where your cash has been spent
Consequences of cash flow problems:
- Cannot trade if you don't have cash to pay bills (insolvency).
- This leads to being in receivership and a 'receiver' is appointed.
- They will try to sell the business as a 'going concern'. Hard to sell.
- Probably close the business down and sell their assets.
Solutions to cash flow problems:
- Delay payments
- Speed up cash inflows
- Find new sources of inflows
- Reduce cash outflows
- Overdraft
- Owners invest more money
cash_flow_exam_question.doc | |
File Size: | 630 kb |
File Type: | doc |
Plenary:
cash_flow_starter.doc | |
File Size: | 446 kb |
File Type: | doc |
cash_flow_problems_notes.doc | |
File Size: | 29 kb |
File Type: | doc |
cash_flow_exam_question.doc | |
File Size: | 630 kb |
File Type: | doc |
student_answers_to_cashflow.pub | |
File Size: | 3094 kb |
File Type: | pub |
cash_flow_9_marker_for_revision.docx | |
File Size: | 798 kb |
File Type: | docx |