Cash Flow Forecasting & Capital

Question 1

Cash Flow Forecasting

Answer 1

Estimation of future cash inflows and outflows

Question 2

Benefits of cash flow forecasting

Answer 2

• Show negative closing cash flows allowing businesses to plan ahead on finding extra finances such as bank overdraft or injection of capital from the owner.
• Important to business owners as business start ups need finance from investors and bankers and these people needcash flow forecast.

Question 3

What happens when businesses face cash problems?

Answer 3

When banks cannot plan ahead and see their potential cash problems they will not be able to pay suppliers and wages and may face insolvency.