Cash Flow Forecast

Question 1

Cash flow forecast

Answer 1

A prediction/estimate of the movement of cash into and out of a business over a period of time

Question 2

Whys a cash flow forecast useful

Answer 2

•identifies the timing of cash shortages and surpluses
•enhances the planning process
•helps identify where problems might occur
•supports attemps to raise finance
•assists in determining the liability of the new business venture

Question 3

Net cash flow

Answer 3

Total receipts- total payments

Question 4

Closing balance

Answer 4

Opening balance+/- net cash flow

Question 5

Ways to improve cash flow position

Answer 5

•improving revenue through increased sales and marketing campaign- depends on economic situation
•increase prices- depend on price sensitivity
•reduce wage bill (redundancy)- Trade Unions?
•reduce drawings
•cut costs (raw materials)- depends on efficiency
•chasing up bad debtors may generate cash
•cut the advertising budget
•invite new shareholders
•sale of assets

Question 6

Directors interest in business accounts

Answer 6

•security of position- measure whether past planning has been success and to aid decision making for the future

Question 7

Workers interest in the business accounts

Answer 7

•to see whether the business is successful, which will impact job security- also if they could afford a wage increase

Question 8

Managers interest in business account

Answer 8

•to see whether the business is successful, which will impact on job security- also could business afford salary increase or bonuses, and has their management been effective

Question 9

Shareholders/investors interest in business accounts

Answer 9

•to see whether the business is successful which may effect value of shares, influencing shareholders wealth and level of dividend which adds to their income

Question 10

Customer interest in business accounts

Answer 10

•may want to know about survival of business which will decide if it’s worthwhile being a customer, also want lower prices

Question 11

Suppliers interest in business accounts

Answer 11

•want to know about survival of business- to find whether the business is likely to be able to pay its trade credit

Question 12

Banks interest in business accounts

Answer 12

Want to know about the survival of business- to find whether the business is likely to be able to pay its loans/overdraft

Question 13

Government interest in business accounts

Answer 13

To find how much tax will be collected from the business- does it consider profit to be excessive and should more tax be levied

Question 14

Competitors interest in business accounts

Answer 14

•to make comparisons- to and planning/competitive strategies