9609 · 5.3.1
Cash flow forecasts flashcards
Revision flashcards for Cambridge 9609 Cash flow forecasts (syllabus 5.3.1). Flip, recall, then mark a real past-paper question.
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Net cash flow formula?
Cash inflows − Cash outflows (for the period).
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Closing balance formula?
Opening balance + Net cash flow.
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Why profit ≠ cash?
Credit sales, depreciation (non-cash), prepaid/accruals, asset purchases affect cash differently from profit.
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Negative closing balance meaning?
Cash shortfall — may need overdraft, loan, or cost reduction.
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Cash inflow examples?
Cash sales, customer payments, loan received, asset sale.
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Cash outflow examples?
Wages, rent, suppliers, loan repayments, asset purchases.
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Improve cash position?
Faster debt collection, slower supplier payment (within terms), overdraft, reduce costs, delay capex.
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Link to 5.5.1 budgets?
Cash budget is a key budget type; links to liquidity planning.
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What is Net Cash Flow?
The difference between total cash inflows and total cash outflows over a specific period. The formula is: Total Inflows - Total Outflows.
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What is a Closing Balance?
The amount of cash a business expects to have at the end of a period. The formula is: Opening Balance + Net Cash Flow. It becomes the next period's opening balance.
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Define Liquidity.
The ability of a business to pay its short-term debts and liabilities as they fall due. A cash flow forecast is a primary tool for monitoring and managing liquidity.
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Give two examples of cash inflows.
1. Cash from sales (cash paid at the point of sale). 2. Receipts from debtors (customers paying for goods bought on credit).
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Give two examples of methods to deal with a forecasted cash shortfall.
1. Arrange a short-term bank overdraft. 2. Delay payments to creditors (suppliers).