Cash Flow Forecasts

Question 1

What is a cash flow forecast?

Answer 1

It is an estimate as to how much cash will be made in the business at a given period

Question 2

Benefit of Cash Flow Forecast? (5)

Answer 2

1. Experience a fluctuation (rise and fall) in sales
2. There could be a reduction in inflows leading to a negative net cash flow
3. The business can accurately plan accordingly
4. Reducing Outflows such as staff members
5. Improving Net Cash Flow for paying bills and suppliers

Question 3

Drawback of Cash Flow Forecast? (5)

Answer 3

1. May become out of date
2. Due to unexpected change in trends leading to a change in demand
3. Making market research invalid
4. Unreliable sales forecast and inaccurate cash flow forecast
5. Leading to business making wrongful decisions like being over and under staffed