M1 : Analyse Cash Flow Problems

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M1 - Analyse cash-flow problems

A cash flow is an accounting statement and is normally called the statement of cash flows. A cash flow statement shows the amount of cash generated and used by a company in a given period. The cash flow is calculated by adding noncash charges to net income after taxes. It is important and crucial for businesses to have a healthy cash flow because it helps with the survival of a business. A business might experience cash flow issues due to the direct link between the low profits or losses and cash flow problems; the loss makes the business eventually run out of cash. They can also experience cash flow problems due to the business holding too much stock, this tie up cash and there is an increased risk that stocks cannot be sold. Businesses can also experience cash flow problems due to the over investment.

Signature has experienced some problems with their cash-flow, the problems that they faced are:
- The balances are negative.
- The opening balance in January is 0.
- The outflows are high and inflows are low.
- The credit sales and commission received in January is 0.
- The investment is low and needed to be higher.
I will be analysing these problems to give a reason as to why they have faced these problems and how they can resolve these problems.
One of the problems that Signature has faced with their cash flow is their negative balance in the first few months. In the forecast there are some negative balances in
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