Cash Flow Forecast

Question 1

How can a cash flow forecast help a business (3)

Answer 1

• identifying a potential shortfall in cash
• comparing actual revenues, costs and profits with forecasts - find solutions
• aiding potential investors in making a decision about whether to finance the business

Question 2

Limitations of a cash flow forecast (2)

Answer 2

• unexpected costs (especially for startups)
• can be too optimistic (unforeseen impact on sales e.g. recession) - investors loose money