cash flow

Question 1

what is cash?

Answer 1

refers to the money available business has available to spend here and now. used to pay day to day bills

Question 2

what happens if a business runs out of cash?

Answer 2

• unable to pay day to day bills
• forced to sell non current asssts
• unable to operate

Question 3

give examples of day to day bills

Answer 3

banks, suppliers, utilities

Question 4

give examples of non current assets

Answer 4

land, machinery, vehicles, buildings

Question 5

LOA- benefit of cash flow forecasts

Answer 5

• the business may experience fluctuations in sales ( why- relate to the case)
• this may mean they experience a reduction in cash inflows at certain times ( relate to case study)
• so if they can accrual forecast cash flow, they can plan accurately
• such as reducing their staff numbers if they forecast lower cash inflows during certain periods of time
• allowing them to reduce wages and subsequent cash outflows
• improving net cash flow during off peak seasons and ensuring they have sufficient levels of cash to keep up with essential payments such as wages

Question 6

LOA- drawback of cash flow forecasts

Answer 6

• cash flow forecast can quickly become out of date
• for example may be an unexpected change in social trends ( relate to the case)
• causing an unexpected change in demand
• making market research in the plan invalid
• resulting in unreliable sales forecasts
• inaccurate cash flow forecasts
• this result in the business being under/overstocked or over/understaffed. choose one and explain impact