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Unit 3- Personal and Business finance ALL CONTEnt £7.49
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Unit 3- Personal and Business finance ALL CONTEnt

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All content notes of Unit 3 BTEC BUSINESS Pearson. Provides all learning aims from a to f. I’m a distinction student in this course.

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  • April 9, 2023
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BTEC level 3 national extended business studies | Unit 3
Rubee McEnaney-Cox
Learning aim E: cash flow and break even
Cash flow: the amount of money flowing into and out of a business over a period
of time.
Cash inflows: Receipts of cash into the business
Examples: Cash sales, Credit sales, Loans, Capital Introduced, Sale of an asset, Bank
Interest received, Grants, Inflow from debt factoring

Cash outflows: Payments of cash from a purchase
Example: Cash purchase, Credit purchase e.g. inventory from suppliers, Purchase of
an asset, VAT, Bank interest paid, Rent, Rates, Salaries, Wages, Utilities

Cash flow forecast: document that shows the predicted flow of cash into and out of
a business over a given time. Normally 12 months.
Cash-flow statements: describe what actually happened in the past to inform managers, owners and investors.

Negative bank balance is often said to have liquidity problems and is in danger of becoming insolvent

Liquidity: measures a business’ ability to meet short-term cash payments
Insolvent: when a business is unable to meet short-term cash payments

Cash flow timings:
Trade Receivables – owe the business money
Receivables are also known as debtors.
Trade Payables – owed money by the business
Payments are also known as creditors.

Why do businesses forecast cash flow?
-Potential cash flow problems in advance
-Helps make sure there is sufficient cash available to make payments
-Providing evidence for financial assistance
-Identifies if the business is holding too much cash

Factors affecting cash flow:
-Amount of cash invested into the firm and held at the start of trading
-Time taken to produce the product/service by converting inputs into outputs
-The amount of inventory held by a firm
-Goods sold on credit
-The amount of credit given by suppliers
-Seasonality

Methods of improving cash flow problems
-Increasing sales
-Increasing unit price
-Negotiate better payment terms with suppliers
-Overdrafts
-Selling off stock at sale price
-Leasing some of its assets

Problems with cash flow forecasting?
-Changes in the economy
-Changes in consumer tastes
-Inaccurate market research
-Competition
-Uncertainty
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