Edexcel-planning Flashcards
Why does a business use a plan?
Reduces the risk of failure
Shows investors a business has done their research so they can invest with them
Well informed about potential problems before they arise
Cash flow forecast definition
Tells a business whether they have enough cash to pay bills,wages and suppliers.
Cash Inflows
Money which goes into a business.
Cash inflows examples
Cash sales
Grants
Share capital
Cash outflows
money which comes out a business
Cash outflows examples
Payments to suppliers, wages and salaries , Payments for fixed assets
Why produce a cash flow forecast?
Warning for cash shortages
Make sure businesses can afford to pay suppliers
Spot problems with customer payments
Net cash flow
Difference in inflows and outflows
Opening balance
Amount business starts with every month
Closing balance
Opening balance + net cash flow
Advantages of cash flow forecasts
Support an application for loan
Help manage cash shortages and surpluses so they can manage it well.
Aid planning and help business avoid costly mistakes
Disadvantages of cash flow forecasts
Based on estimates and actual results may differ from estimates
Require research and time to prepare and update
External factors can impact and wont be involved in cash flow forecasts.
