2.docx - Assessment 2
Part A – Written or Oral Questions 1 Explain Cash flow Management Cash flow management refers to the process by which an

2.docx - Assessment 2
Part A – Written or Oral...

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Assessment 2
Part A – Written or Oral Questions 1. Explain Cash flow Management. Cash flow management refers to the process by which an organization controls the inflow and outflow of funds. The basic goal of cash flow management is to ensure that the incoming capital flows are always greater than what is paid out to keep the business at a surplus level. Cash flow management also acts as an extra duty to help ensure that excess funds are invested or held wisely in order to reap the proper returns from blocked funds. Money or cash is the lifeblood of any business. When cash stops circulating, all-important operations can be stopped. 2. What are the two important benefits of cash flow management? Cash flow management ensure optimal that cash flow that prevent the cash shortage. An effective cash flow management will allow for weekly forecast to ensure the ability to pay bill. 3. List the three components of cash flow Stock Trade debtors Trade creditors 4. What is the purpose of cash flow planning? The purpose of cash flow is responsible for providing some detailed projection on where the money is actually coming and the source of income. 5. When preparing cash flow budget, what will you need to estimate? We need to estimate two things:
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Cash inflow Cash outflow 6. Complete the following cash flow equation: Beginning cash balance + Estimated Sales – Estimated Purchases = Ending Cash Balance 7. Which component is generally the largest cash outflow in a retail business? The Cost of good sold is considered to be the largest cash outflow in a retail business and it is under the operating activities. 8. What are the two main financial statements prepared in a small business? Balance sheet Profit & loss statement 9. You have purchased a computer for your business and pay for it in full at the time of purchase with a business cheque; Write down the correct entry for the purchase that you made on behalf of the company. Dr. computer equipment – Asset 2,000 Cr. Credit bank account 2,000 10. If you knew that your supplier was going to be unable to meet your supply requirements in three months’ time what would you do? There must be some contingencies or bank up plan if the current supplier fails to meet the supply requirements in three months.
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