Finance · Both
Cash Flow & Sources of Finance
Profit is not the same as cash. Businesses can fail from poor cash flow even if profitable on paper.
Cash flow
Inflows: sales receipts, loans, investment.
Outflows: suppliers, wages, rent, loan repayments.
Forecast helps spot shortfalls early; solutions include overdraft, delay payables, speed receivables.
Sources of finance
Internal: retained profit, selling assets, owner capital.
External: bank loan, overdraft, share capital, trade credit, grants.
Match source to purpose and risk.
Worked example
Why might a profitable firm run out of cash?
Solution: Customers pay late while the firm must pay suppliers and wages now.
Practice questions
1. Profit vs cash?
2. Name two external sources of finance.