2.1.4

Question 1

What is a cash flow forecast?

Answer 1

A prediction of anticipated cash inflows and outflows.

Question 2

Why is a cash flow forecast important?

Answer 2

If end up having a cash shortfall you cannot pay for costs which will lead to Business failure.

Question 3

Formulas of Cash Flow forecast. (3)

Answer 3

Net cash flow = Inflows - Outflows
Opening balance = Previous months closing balance
Closing balance = Opening balance +/- Net cash flow

Question 4

2 Pros of Cash Flow Forecast

Answer 4

Evidence for obtaining finance
Plan for any cash shortfalls

Question 5

1 Con of Cash Flow Forecast.

Answer 5

Only predictions