Chapter 20 - Planning the Business☀️

Question 1

What is a cash flow forecast?

Answer 1

A plan showing all the expected cash receipts and cash payments in a firm over a period of time

Question 2

What are reasons for having a business plan?

Answer 2

1. Firm knows where it is going and what it hopes to achieve

2. Needed if firm is applying for loans or grants

Question 3

What are the main areas of a business plan?

Answer 3

1. Product/Service: Details on main competitors
2. Fixed Assets of the Business: Details on premises used
3. Finance: Amount of additional finance required and purpose, how the finance is to be repaid (cash flow forecast)

Question 4

What are the reasons for preparing a cash flow forecast?

Answer 4

1. It shows a business if they will be able to repay their bills
2. It shows a business the months when they may be short of cash

Question 5

What are the income sources in a cash flow forecast?

Answer 5

1. Sales
2. Loans
3. Government Grants
4. Sale of a Fixed Asset e.g. Motor vehicle
5. Money from the issue of shares

Question 6

What is the difference between an Analysed Cash Book and a Cash Flow Forecast?

Answer 6

1. ACB records actual cash receipts and payments; CFF records planned cash receipts and payments
2. ACB is prepared for 1 month; CFF is prepared for a no. of months