Lesson 3

Debt Cash flow Obligation  Cash out flow Cash Cash balance
Cash inflow
 
 

__________1. refers to the net balance of cash moving into and out of a
business at a specific point in time.
__________2. is legal tender that can be used to exchange goods, debt, or
services.
__________3. is the money going into a business which could be from
sales, investments or financing.
__________4. is anything owed by one person to another
__________5. is a course of action that someone is required to take,
whether legal or moral.
__________6. describes any money leaving a business
__________7. is the amount of money a company currently has available
• Cash flow - is defined simply as the flow
of money coming in from a source which
can be income for a family, a personal
allowance, or revenues in business, and
going out, which can be spending for
personal or family needs or paying for
operations and debts in a business.
 Why cash flow is important?

• Because it is an indication
whether the operations of any of
these entities are succeeding or
failing.
If the company is engaged
in selling products or
consumer goods, there
will be periods when
sales may be high in a
particular month but
considerably less in the
following month.
• As mentioned before, for
a business to operate
smoothly, one must
ensure that there is
enough money generated
to be able to meet all the
requirements of the
business.
• A business is healthy when there is a
positive cash flow, which means that the
business has enough funds to pay its
obligations.
• A negative cash flow, which means
that it is not doing well because it is
experiencing a cash shortage over a
particular period.
 Making a Cash Flow Statement

• A cash flow statement shows the

amount of cash available to settle
obligations.
• Let's take a look at a simple cash flow
statement to get an idea about the
information it conveys and its use to
the individual, family, or business.