10

Question 1

Disadvantages of a cashflow forecast

Answer 1

1. May be based on unrealistic assumptions, which may yield inaccurate results (leading to working capital shortages)
2. Time consuming to prepare.
3. Difficult to accurately forecast 12 months ahead.

Question 2

How can you manage cash deficits

Answer 2

1. Shorten average trade receivable period
2. Extend Credit Periods
3. Reduce stock levels
   (add some more)

Question 3

What are the uses of a cashflow forecast?

Answer 3

1. Enables owner to plan business expenditure
2. Helps set business targets
3. Identifies areas where costs need to be cut

Question 4

Define Cash Flow

Answer 4

The movement of money into and out of the business.

Question 5

What is the difference between cash and profit?