Planning

Question 1

3 contents of a business plan

Answer 1

1) Executive summary - pverview of business start up
2) Business opportunity - description of product, quantities sold etc.
3) Buying + production - where the business will buy it supplies and methods of production

Question 2

A thorough and well-written business plan is likely to contain

Answer 2

1) Force owners to take an objective, critical and unemotional look at whole business plan
2) Provide a ‘road-map’ that shows a clear dorection for the development of the business
3) Provide an action plan that identifies key tasks and goals to improve the chance of success

Question 3

Net cash flow formula

Answer 3

Total receipts - Total Payments

Question 4

Closing balance formula

Answer 4

Net Cash flow - opening balance

Question 5

2 advantages of a cash-flow forecast

Answer 5

1) Identifying the timing of cash shortages and surpluses (where to borrow cash and where ot invest in business)
2) Enhances the planning process

Question 6

2 disadavantages of a cash-flow forecast

Answer 6

1) Business activity is subject to external forces and out of control from owners therefore forecast can change
2) Some financial forecats will be based on an estimate so can have innacuracy