Why is the cash flow cycle a big problem for a small business?
Money is needed for start-up costs before any money has been made at all.
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What are the two factors which impact length of the cash flow cycle?
The type of product (i.e. different products take different amounts of time to make and can be held as stock for differing amounts of time), credit payments ( agreed period of time between when the payment is due).
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What are the 5 ways a business can improve cash flow?
Overdrafts, holding less stock, reduce time between paying suppliers and getting money, credit controllers can keep debtors in control, debt factoring, sale and leasebacks.
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What are cash flow forecasts?
They show the amount of money that managers expect to flow into the business and flow out of the business over a period of time.
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What can cash flow forecasts be used for?
Used by managers to make sure the business will have enough cash to pay suppliers and employees, show them to banks and venture capitalists to gain finance, used to check if a business isn't holding too much cash
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What does a large and small firm base forecasts on?
Large firms - past experience. Small firms - business capacity, similar firms and trends shown by market research.
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Why is cash flow forecasting not always accurate?
Can be based on false assumptions, circumstances can change suddenly, needs experience and lots of research, false forecast can cause insolvency.
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Other cards in this set
Card 2
Front
Why is the cash flow cycle a big problem for a small business?
Back
Money is needed for start-up costs before any money has been made at all.
Card 3
Front
What are the two factors which impact length of the cash flow cycle?
Back
Card 4
Front
What are the 5 ways a business can improve cash flow?
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