Understanding Cash Flow and Revenue Management for Business

Course: CPCCBC5002A Task:2 Complete the following Answer 1). Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business. Cash received are inflows, and money spend are outflows. Cash flow statements refer to the amount of cash entering and leaving a business during a particular time period. It shows the inflow and outflow of your money, but it does not give an accurate picture of profitability. There are ways of cash flows of cost expended are: Operations: It measures the cash going in and out of your business that is related to your products or services. This section of your business's cash flow statements shows that your business is generating enough money from sales to keep up with expenses. It requires lots of resources to run operational activities. It include marketing costs, bank charges, office supplies, rent, employee salaries and cost of goods sold etc. Investing: It reflects when your business buys or sells long term assets. An asset is property you own that adds value to your business. Asset includes equipments, stocks, property, notes and mortgages. For purchasing all those assets a company requires huge investments. This section can show that your business is growing because you are investing more in your company's future. Financing: To start a business, you need to know how to finance it. One way to finance your small business is to get a loan from the bank. The financing section of the cash flow statement looks at how your company pays back lenders and investors. It shows inflowing and out flowing cash as a result of debts, loans, or dividends. Revenue is the money a company earns from sale of its products and services. It provides a measure of the effectiveness of a company's sales and marketing. Both revenue and cash flow are used to help investors and analysts evaluate the financial health of a company There are ways of cash flows of revenues earned are: Accrued Revenue: It is the revenue earned by a company for the delivery of goods or services that have yet to be paid by the customers. Revenue eventually impacts cash flow figures but does not automatically have an immediate effect on them Unearned Revenue: It can be thought of as the opposite of accrued revenue, in that unearned revenue accounts for money prepaid by customers for goods or services that have yet to be delivered. Sources of revenue: It can earn through typical selling of products or services. Its source depends on the company or organisation involved. Rental income, in the form of tax receipts, property taxes, interest income etc is sources of revenue .