Final dates! Join the tutor2u subject teams in London for a day of exam technique and revision at the cinema. Learn more

Study Notes

Causes of cash flow problems

Level:
AS, A-Level
Board:
AQA, Edexcel, OCR, IB

Last updated 22 Mar 2021

What is a cash flow problem and what do they happen so often in all types of business?

A cash flow problem can be defined as:

When a business does not have enough cash to be able to pay its liabilities

The main causes of cash flow problems are:

  • Low profits or (worse) losses
  • Over-investment in capacity
  • Too much stock
  • Allowing customers too much credit
  • Overtrading
  • Unexpected changes
  • Seasonal demand

Let's look at these in a little more detail.

© 2002-2024 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.