Cash Flow Forecast Flashcards

1
Q

What is the definition of a cash flow forecast

A

It is a statement that identifies the money coming in and the money going out of a business over a period of time

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2
Q

What is an inflow

A

The money the business receives

Coming into a business

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3
Q

What is an outflow

A

Any money that leaves the business

Coming out of the business

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4
Q

Give examples of inflows

A
Sales of products 
Sales of assets 
Interest in savings 
Capital from owners 
Bank loans
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5
Q

Give examples of outflows

A
Payment to suppliers 
Rent 
Wages 
Bills 
Advertising 
Equipment 
Machinery 
Stuck 
Interest on a loan
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6
Q

What are “ receipts “ also known as

A

Inflows

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7
Q

what are “payments “also known as

A

Outflows

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8
Q

How to calculate the net cash flow

A

Total inflows - total outflows

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9
Q

How to calculate the closing balance

A

Net cash flow + opening balance

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10
Q

If u have a negative closing balance what is this known as ?

A

A deficit ( when a business does not have enough money to cover the outflows )

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11
Q

If I have a positive closing balance what is the known as ?

A

A surplus ( when a business has enriched extra money in their account )

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12
Q

What is a deficit

A

When a business does not have enough money to cover the outflows

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13
Q

What is a surplus

A

When a business has enough extra money in their account

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14
Q

What does cash flow forecast not show a business

A

Profit and loss!!!!!

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15
Q

What is the difference between profit and cash

A

Profit is the amount of money that a business has left once all costs have been paid

Whereas cash is the money that the business has available to spend at any specific moment

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16
Q

How can a business increase its cash inflows

A

Improve cash flow from customers

Increase sales revenue

17
Q

How can a business decrease its cash outflows

A

Reduces the number of employers

Reduce the orders of materials and stock

18
Q

What causes cash flow problems

A

The inflows are too low the outflows are too high

19
Q

What could be the cause behind high outflows

A

Over spending
Over investment
Too much stock

20
Q

Why is a negative cash flow not always a problem

A

It may only be tempting

The business can obtain additional finanace in the short term eg bank loan

21
Q

What is a negative cash flow a problem

A

This may mean they do not have the cash to pay their suppliers

This may mean they do not supply the business in the future which will mean the business can’t produce their products to sell

22
Q

Why is a surplus of a cash flow positive

A

The business should always have extra cash for any unexpected coast eg machinery braking

23
Q

Why is a surplus of a cash flow a problem

A

Because the cabs needs to be used within the business to makes even more profit

24
Q

Why is a cash flow forecast useful

A

It can help predict problems eg deficits ,

It can help a business apply for a bank loan

It is useful to predict when a business can lag its debts

25
Q

What are the risks of a business not completing a cash flow forecast

A

A business will be unable to see whether they can pay its bills

They won’t know if they need to arrange additional finanace

May not be Able yo pay suppliers on time

26
Q

Why is a cash flow forecast useful for seasonal products

A

It will help to predict whether the profits will make enough you money during the busy months to smoke up for the quieter months

27
Q

What are the disadvantages of using a cash flow forecast

A

It is only a forecast and figures may change eg price of raw materials and selling price

They take most of research to complete and the forecast will need regular updates