The Importance of Cash Flow Flashcards

All 5 cards in this deck

What is cash in a business?

Money in notes, coins and bank accounts that is available to the business.

What is cash flow?

The movement of money into and out of a business' bank accounts.

What is insolvency?

When a business runs out of cash and can no longer pay its bills.

Give one benefit of a positive cash flow position.

Reduced risk of insolvency and business failure — bills, wages and suppliers can be paid without borrowing.

True or false? A business that is making a profit can still run out of cash.

True. Profit can be tied up in stock or in customer invoices that have not been paid yet, while bills are already due.