Cash Flow Forecast Flashcards
What is the difference between Inflow and Outflow?
Inflow = money you receive Outflow = money you spend
What are the benefits of using the forecast?
- Budgeting, good for investors to see a businesses finances.
- Can spot trends and anticipate cash problems.
What is the formula for Net Cash Flow?
Net Cash Flow = Inflow - Outflow
What is a Opening Balance?
The amount of cash the business has in their bank account on the 1st of each month.
What is a Closing Balance?
Total amount of cash the business has in their account on the last day of each month.
Indicates the businesses financial performance monthly.
What is the formula for Closing Balance?
Closing Balance = Net Cash Flow + Opening Balance
What is the importance of producing a Cash Flow Forecast?
Businesses - positive cash balance is needed to meet day to day expenses.
- Forward looking statement that tries to predict cash inflow and outflow for the future. (cash flow forecast).
- Important part of business plan.
- Backward looking statement shows what happed to cash outflow and inflow. (Cash flow statement).
- Normally presented as a part of a businesses account.
- A potentially profitable business may fail due to cash flow problems.
What is Value Added Tax (VAT)?
Taxes are charges made by the government. They are charged on a large number of goods and services that have been registered with tax.
Government get more tax by making tax on products more expensive. Reduces taxes being taken from the profit of a business.
Drawbacks of producing forecast?
- Cash sales may be under or over estimated. The amount of cash sales depends upon the scale of research.
- Cash flow forecast are difficult for new businesses as they have no previous data to look back on to make predictions.
- Debtors payments from sales forecast, predicts will be on time but it’s false.
