Question 1: Define 'cash flow' in a business context.

Answer: Cash flow refers to the movement of money into and out of a business, showing how much cash is available at any given time.

Question 2: List three examples of cash inflows for a small retail business.

Answer: Sales revenue, bank loans received, and money from customers paying invoices.

Question 3: List three examples of cash outflows for a small retail business.

Answer: Rent payments, wages to employees, and stock purchases.

Question 4: Explain why positive cash flow is important for a business.

Answer: Positive cash flow ensures the business can pay its bills, invest in growth, and avoid financial difficulties.

Question 5: Describe what a cash flow forecast is and why it is useful.

Answer: A cash flow forecast predicts the expected cash inflows and outflows over a period of time, helping businesses plan for shortages and avoid cash shortages.

Question 6: Identify two common causes of cash flow problems in a business.

Answer: Late customer payments and unexpected expenses.

Question 7: Suggest two strategies a business can use to improve its cash flow.

Answer: Speed up receivables by offering discounts for early payments and delay some non-essential payments to suppliers.

Question 8: Draw a simple cash flow diagram showing cash inflows and outflows over a month. Include at least two sources of inflow and two outflows.

Answer: A diagram with a horizontal timeline for the month, arrows pointing upward labeled 'Sales revenue' and 'Loan received' for inflows; arrows pointing downward labeled 'Rent' and 'Wages' for outflows.

Question 9: Explain the difference between positive and negative cash flow, giving an example of each.

Answer: Positive cash flow occurs when inflows are greater than outflows, such as receiving more from sales than paying expenses. Negative cash flow happens when outflows exceed inflows, such as paying wages that are higher than sales revenue.

Question 10: Identify two financial statements that can help a business analyze its cash flow, and briefly describe their purpose.

Answer: The cash flow statement shows all cash inflows and outflows during a period, helping to assess liquidity. The income statement shows profit or loss, which can indirectly affect cash flow.

Question 11: Sketch a simple bar chart illustrating the cash flow for a business over four months. Use the space below. (Describe what a correct sketch would include.)

Answer: A bar chart with four vertical bars, each representing a month. The height of each bar indicates the amount of cash flow, with some months showing positive (above zero) and others negative (below zero).