cash flow forecast

Question 1

What is a cash flow forecast?

Answer 1

A prediction or estimate of the movement of cash in and out of a business over a period of time.

Question 2

Why are cash flow forecasts useful

Answer 2

• Identify cash shortages and surpluses.
• increase planning
• increased survival
• Support attempts to raise finance.
• helps plan expansion

Question 3

How do you calculate Net Cash Flow?

Answer 3

NetCashFlow=Total cash Inflows−TotalCash outflows

Question 4

How do you calculate Closing Balance?

Answer 4

ClosingBalance=OpeningBalance+ NetCashFlow

Question 5

What are some ways to improve a business’s cash flow position?

Answer 5

• Increase sales
• Increase prices
• Reduce wage bill
• Cut costs, such as using cheaper suppliers.
• Increase promotions.

Question 6

Who are the stakeholders interested in business accounts?

Answer 6

• Directors: To assess past success and aid future decision-making.
• Workers: To see if the business is successful and can afford wage increases.
• Managers: To evaluate job security and potential for bonuses.
• Shareholders/Investors: To see if the business is successful and if dividends or share value will increase.
• Customers: To assess the business’s survival and competitiveness.
• Suppliers: To check if the business can pay trade credit.
• Banks: To know if loans/overdrafts will be paid.
• Government: To collect taxes based on business profitability.
• Competitors: To make comparisons for strategic planning.