Cashflow Forecast

Question 1

What is the first way to solve cash flow problems

Answer 1

• once a problem is spotted early = increase the amount of cash inflows
• short trade credit periods
• boost revenue = higher price / lower price = attract more clients
• depends on the price elasticity of the goods

Question 2

What is the second way of trying to solve cash flow shortages

Answer 2

• reduce cash outflows = bring marketing budgets down (inflows lower) = switch cheaper suppler (lower raw material costs) = quality suffers = no sales

Question 3

What is the third way a business can solve cash flow

Problems

Answer 3

• if the closing balance look positive in future = arrange an overdraft = cover costs
• or use bank loans to cover high expenditure

Question 4

Give main adv of cash flow forecast + K.O.E

Answer 4

• helps identify in advance any periods of cash flow shortages = business with out cash can’t continue marketing/ pay/ sourcing raw materials / honour financial commitments to investors and banks = legal issues 😬

Question 5

Give other adv of cashlfow forecasts

Answer 5

• able to show a businesses credibility to secure investments / lending

Question 6

Give disadvantage of cash flow forcast

Answer 6

• it is a PREDICITION = hard to accurately predict especially if ur tryna do long term predictions = only based on r&d