Financial Planning Flashcards
1
Q
What is and why do businesses plan
A
- a look into the future
- to persuade lenders that the business will make enough profit
- to set aims and objectives
- to set cost of products
- establish profit margins
- attract investors
- identify problem areas
- monitor effectiveness
- see if they achieve aims
2
Q
Cash flow forecasts
A
- show the expected income and expenditure of a business over the coming year
3
Q
Liquidity
A
- How quickly cash is raised and ability to pay bills
- covers short term debts
4
Q
Cash inflow
A
- money coming into the business
- bank loan, sales, owners capital
5
Q
Cash outflow
A
- The money coming out of the business
- wages, rent
6
Q
Factors affecting cash flow
A
- high expenses
- variable costs
- fixed costs
- consumers trends
- economic variables
- competitor actions
7
Q
Opening balance=
A
Closing balance from each month
8
Q
Closing balance
A
Monthly balance + opening balance
9
Q
What is the relevance of a business plan in obtaining finance
A
- help to sell opportunity to invest in your business to founders- understand vision and goals - as set in plan
10
Q
Uses of cash flow forecast
A
- predictions - plan for future
- make important decisions e.g employ more staff
- can anticipate when there will be cash shortages
11
Q
Limitations of cash flow forecast
A
- updates- needs regular updates or may be inaccurate
- predictions- don’t take e.g supplier closing into consideration
- time- longer cash flow forecast in made for- the more inaccurate
- mistakes - less experienced - tricky to understand and make
12
Q
Sales forecast
A
- estimating future revenue by predicting how much of a product or service will sell in the next week, month or year.
13
Q
Factors affecting sales forecasting
A
- consumer trends
- economic variables
- competition actions
14
Q
Consumer trends
A
-increase/decrease in sales due to trends in the market changing
15
Q
Economic growth
A
- boom/recession - growth/decline in economy impacts costs and sales
