Edexcel-planning 2.1

Question 1

Why does a business use a plan?

Answer 1

Reduces the risk of failure
Shows investors a business has done their research.
Well informed about potential problems before they arise

Question 2

Cash flow forecast definition

Answer 2

Tells a business whether they have enough cash to pay bills,wages and suppliers.

Question 3

Cash Inflows

Answer 3

Money which goes into a business.

Question 4

Cash inflows examples

Answer 4

Cash sales
Grants
Share capital

Question 5

Cash outflows

Answer 5

money which comes out a business

Question 6

Cash outflows examples

Answer 6

Payments to suppliers
wages and salaries
Payments for fixed assets

Question 7

Why produce a cash flow forecast?

Answer 7

Warning for cash shortages
Make sure businesses can afford to pay suppliers
Spot problems with customer payments

Question 8

Net cash flow

Answer 8

Difference in inflows and outflows

Question 9

Opening balance

Answer 9

Amount business starts with every month

Question 10

Closing balance

Answer 10

Opening balance + net cash flow

Question 11

Advantages of cash flow forecasts

Answer 11

Support an application for loan
Help manage cash shortages
Help business avoid costly mistakes

Question 12

Disadvantages of cash flow forecasts

Answer 12

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.

Question 13

Why is cash flow important?

Answer 13

Cash flow forecasts tell businesses whether they have enough cash to pay bills.
Cash flow problems are the main reason a business will fail
Regular and reliable cash flow enables a business to stay on track.