CASH FLOW

EXERCISE Nª1

Insert the following words in the gaps in the text.

Insolvent liquidity reputation reserves net suppliers positive working

Cash Flow is essentially a company´s ability to earn cash. It is the amount of cash made during
a specified period that a business can use for investment. (more technically, it is net profit plus
depreciation plus variations in reserves) The Flow of founds is cash received and payments
made by a company durind a specific period-except that many people also use the term cash
Flow to describe this! New companies generally begin with adequate funds or working capital
for the introductory stage during which they make contacts, find customers and build up sales
and a reputación .But when sales begin to rise, companies often run out working capital: their
cash is all tied up in work-in -progress, stocks and credit to customers. It is an unfortunate fact
of business life that while suppliers tend to demand quick payment, customers usually insisto
n extended credit, so the more you sell, the more cash you need. This provoques a typical
liquidity crisis the business does not have enough cash top ay short- term expenses. A positive
cash Flow Will only reappear when sales growth slows down and the company stops
“overtrading”- But companies that have not arraged sufficient credit Will not get this far: they
Will find themselves insolvent -unable to meet their liabilities.

EXERCISE Nª2

Match up these words to make Word partnerships from Exercise 1, then match them with the
definitions below:

1. Extended a. capital
2. Working b. profit
3. Cash c. crisis
4. Net d. credit
5. Liquidity e. received

3E money already paid.

2A the money and stocks of godos held by a company which are used to produce more
goods and to continue trading.

1D longer tan normal payment terms.

5C short of cash.

4B the money made from selling godos after the deduction of all associated costs.