2.1.4 - Planning Flashcards
1
Q
What is a business plan?
A
Outlines what a business plans to achieve and how it plans to achieve this
2
Q
Main aims of business plan
A
- Gain finance
- Reduce risk of failure
- Give focus and direction
3
Q
What is a cash flow forecast?
A
A prediction of the cash coming in and going out of a business in the form of a table
3
Q
Importance of cash flow forecasts
A
- Paying suppliers
- Paying employees
- Preventing failure
4
Q
What does insolvent mean?
A
When a business can no longer pay its staff wages or debts as they have no cash
4
Q
What are inflows?
A
Money coming into a business
- Known as receipts
5
Q
What is net cash flow?
A
Total Inflow - Total Outflow
6
Q
What is opening balance?
A
Same as the months before closing balance
7
Q
What is the closing balance?
A
Net cash flow + Opening balance
8
Q
Benefits of cash flow forecasts
A
- Can predict surges in demand and therefore stock up correctly
- Helps apply for a loan
- Can identify negative cash flow to inject source of finance
9
Q
Disadvantages of cash flow forecasts
A
- Based on estimates
- Doesn’t take into account external factors
- Biased figures for loans
