3.7 Cash flow

• Distinguish profit and cash flow

• Profit records financial performance; cash flow tracks timing of cash inflows and outflows

• Analyse working capital

• Working capital supports daily operations and short-term liquidity

• Analyse liquidity position

• Liquidity position reflects ability to pay short-term obligations when due

• Prepare and interpret cash flow forecasts

• Forecasts identify expected cash shortages, surpluses, opening balances, and closing balances

• Analyse the relationship between investment, profit, and cash flow

• Investment can reduce short-term cash while supporting long-term profit potential

• Evaluate strategies for dealing with cash flow problems

• Strategies include reducing costs, improving receivables, delaying payables, arranging overdrafts, selling assets, and revising stock levels