Cash flow forecasts Flashcards
1
Q
Ways to improve cash flow
A
- reduce unnecessary expenses
- encouragement debtors to pay quicker
- set target to avoid cash flow issues
- encourage suppliers to offer extended credit
2
Q
Uses of cash flow forecast
A
- control
- target setting
- planning
- monitoring
3
Q
Benefits of cash flow forecast
A
- help the business to predict when they might have cash flow problems
- if the business has predicted and planned for its financial needs, then banks may extend overdraft or offer loans
4
Q
Limitation of cash flow forecast
A
- fail to consider that a business can delay payments to increase net cash inflows and that it can buy a leasing arrangement to avoid using cash
- has to be carefully managed, having too little cash means suppliers, and even employees may not be paid on time
5
Q
Cash inflows
A
- cash sales
- credit sales
- loans
6
Q
Cash outflows
A
- cash purchases
- credit purchases
- rent
- wages and utilities
