2.1.4 Planning

Question 1

purpose of a business plan

Answer 1

• secure external funding
• ensure firm develops financial structure
• identify problem areas
• to set targets
• provide realistic expectation

Question 2

define cash flow

Answer 2

balance between the cash inflow and outflow in term of relative size ensuring positive cash balance to meet day to day expenses

Question 3

define cash flow forecast

Answer 3

forward looking statement to predict cash inflows and outflows

Question 4

net cash flow

Answer 4

inflows-outflows

Question 5

opening balance

Answer 5

previous months closing balance

Question 6

closing balance

Answer 6

opening balance + net cash flow

Question 7

limitations of a cash flow forecast

Answer 7

• 12 month snapshot, short term to make concrete decisions
• only an estimate
• owner may have overstated expenditure or understated income
• competitors actions

Question 8

uses

Answer 8

• control and monitor cash in + out
• prepare for short falls
• help secure a better deal on finance