Cash Flow 💸

Question 1

What are the uses of cash flow forecasts?

Answer 1

Identify the timings of cash shortage and surplus- know when is the right time for opportunities

supporting applications for finance-Helps indicate the future outlook helps produce a cash flow forecast statement- more likely for investor to like

enhancing the planning process - Lack of planning leads to poor business performance less likely to make mistakes

monitoring cash flow- Allows it to be effective

Question 2

What is the limitations of cash flow forecasts?

Answer 2

Based on estimates- Not always accurate net cash flow and closing balance may be unreliable

Business activity is subject to external forces that be out of control control for owners or managers like interest rate

Owners or managers may spend too much time updating a cash flow may be too much may not meet customer needs

only focuses on one business variable catch other variables are important to you