Cash Flow Forecasts

Question 1

A cash flow forecast is a financial statement used to monitor a business’s __________________.

Answer 1

monthly cash flow

Question 2

Inflow is the money entering a business.
(Every week/ month).

This includes:
1.
2.
3.

Answer 2

1. Sales revenue.
2. Investments.
3. Donations.

Question 3

Outflow is the money leaving the business.

This includes:
1.
2.
3.
4.

Answer 3

1. Rent.
2. Utilities.
3. Insurance.
4. Wages.

Question 4

You deduct all of the______________ from the _____________ to find out the monthly balance.

Answer 4

outflows
inflows

Question 5

Breakeven is when profits finally level off with costs.

Breakeven can be presented using a:
1.
2.

Answer 5

1. Formula.
2. Breakeven chart.

Question 6

Break even= _______________________________

Answer 6

fixed costs/ contribution per unit

Question 7

Contribution per unit= _______________________________________

Answer 7

Selling price per unit - Variable costs per unit

Question 8

Margin of safety is what?

Answer 8

The number of units sold after the breakeven point.

Question 9

What 6 things do you need in a break even chart:
1.
2.
3.
4.
5.
6.

Answer 9

1. Total revenue.
2. Total costs.
3. Fixed costs.
4. Margin of safety.
5. Area of profit/ loss.
6. Break even point.

Question 10

What is a credit period?

Answer 10

The time given to customers to pay for goods or services.

Question 11

What is liquidity?

Answer 11

A business’s ability to make short-term cash payments.

Question 12

What is being insolvent?

Answer 12

When a business is unable to meet short-term cash payments.

Question 14

If a business has a negative closing balance, they may become _________________.

Answer 14

insolvent

Question 15

What are the 4 solutions to cash flow problems:
1.
2.
3.
4.

Answer 15

1. Overdraft arrangements.
2. Negotiating terms with creditors.
3. Rescheduling capital expenditure.
4. Leasing an asset.

Question 16

What are the 2 main advantages of a cash flow forecast:
1. Enables cash flow to be _________________ and to take any ____________________.

2. Identifies _____________________________ in advance for a business to plan ____________________.

Answer 16

monitored
corrective actions

negative closing balances
corrective actions

Question 17

What are the 2 main disadvantages of a cash flow forecast:
1. Cannot plan for ________________________.

2. __________ taken to make a cash flow forecast could have been spent on other _______.

Answer 17

unexpected setbacks

Time
tasks

Question 18

What is included in a statement of comprehensive income:
1.
2.
3.
4.

Answer 18

1. Costs of goods sold.
2. Gross profit.
3. Expenses.
4. Net profit.

Question 19

What is the current value after depreciation also known as?

Answer 19

Net book value/

Question 20

There are 2 types of depreciation:
1. Straight-line depreciation.
2. Reducing-balance depreciation.

Reducing balance depreciation is when an asset is ________________________________________________.

Answer 20

deprecated by a percentage of its value each year