Question

1.Define what is a cash flow statement.

2. Define leverage.

3)Fast Growing companies have a big appetite for cash. Managers follow 3-key rules in the textbook that can aid in a company's cash flow . What are they?
3.
4.
5.

6.What are the steps of the "cash flow cycle" (5pts.)

Answer 1

1. Cash flow statement

A cash flow statement simply refers to a statement of cash flow. It shows the flow of incoming cash and outgoing cash. It is a statement showing the change in cash position from one period to another. There are 2 types of cash flows.

• Cash inflow - It arise when the transaction results in the increase in cash and cash equivalents.
• Cash outflow - It arise when the transaction results in the decrease in cash and cash equivalents.

2. Leverage

Leverage is used to describe the ability of a firm to use fixed cost asset or funds to increase the return to its equityshareholders. it refers to taking on debt, while margin is debt or borrowed money a firm uses to invest in other financial instruments. Following are the types of leverage.

• Fianancial leverage.
• Operating leverage.
• Combined leverage.

3. Cash flow rules

1. It pays to be proactive.
2. Consider the ROI of financing, not costs alone.
3. Know your options.

6. Steps in cash flow cycle

The Cash Flow Cycle describes how the cash Flows in and out of business. Following are the steps;

1. Cash
2. Buy inventories
3. Mark up
4. Sale
5. Receivables