Cash Flow Forecasting Flashcards
1
Q
What does a cash flow forecast do?
A
- identifies the inflows and outflows of a business over a period of time.
- way of predicting if a business will have enough money to pay its debts.
- forecast should be updated if there are any expected inflows or outflows so a business can predict problems.
2
Q
Examples of cash inflows:
A
- sale of products
- interest on savings
- sale of assets (such as old machinery)
- borrowed money such as loans.
3
Q
What are inflows?
A
Money a business receives.
4
Q
What are outflows?
A
Money a business spends.
5
Q
What are regular inflows?
Examples of regular inflows:
A
Money a business receives on a regular basis e.g.
monthly sales or annual interest.
6
Q
What are irregular outflows?
Example of irregular outflow:
A
Money a business receives irregularly e.g. loans or sales of assets.
7
Q
Examples of cash outflows:
A
- payments for stock or raw material
- wages and bills
- payments for equipments
- loan repayments
8
Q
What is the formula for net cash flow?
A
total inflow - total outflow
If outflow is bigger than inflow, net cash flow will be negative.
9
Q
What is the formula for closing bank balance?
A
net cash flow + opening balance
10
Q
Improving cash flow:
A
- Encourage customers to pay with cash -
receive money more quickly - Encourage customers to pay straight away -
receive money sooner- will have cash to cover its costs - Sell extra stock (short term solution) -
focus on selling extra stock than buying new stock.
