2.1.4

Question 1

What is a business plan?

Answer 1

An important part of setting up a business which sets out the business’ objectives and strategies

Question 2

Is ‘operations’ a content of a business plan?

Answer 2

Yes

Question 3

What are the purposes of a business plan?

Answer 3

• To secure external funding - To ensure that the firm develops a healthy financial structure
• To help identify problem areas that the business might face
• As a focus to set targets and check on the firms development
• To provide realistic expectations of what can be achieved

Question 4

What is a cash flow forecast?

Answer 4

A forward looking statement that tries to predict cash inflows and outflows in the future

Question 5

What is a cash flow statement?

Answer 5

A backward looking statement that shows what happened to cash inflows and outflows

Question 6

How do you calculate Net cash flow?

Answer 6

Net cash flow = cash inflows - cash outflows

Question 7

What is net cash flow?

Answer 7

The net result of cash inflows and cash outflows each month

Question 8

What is meant by opening balance?

Answer 8

How much the business has at the start of each month

Question 9

What is closing balance?

Answer 9

How much the business has at the end of each month

Question 10

How do you calculate closing balance?

Answer 10

Opening balance + net cash flow

Question 11

What are the 5 causes of cash flow problems?

Answer 11

• Credit sales
• Overtrading
• Internal management
• Seasonality
• Unexpected