planning CFF basic Flashcards
1
Q
define cash flow forecast
A
cash flow forecasts will show the expected income and expenditure of the business over the coming year
2
Q
examples of cash inflows
A
sales, loans, interest, assets sold
3
Q
examples of cash outflows
A
supplier payments, wages, loan repayments
4
Q
uses of cash flow forecast
A
- identifies shortfalls in cash
- assesses the ability to pay suppliers/employees
- identifies when financial support may be needed
- identifies when to undertake marketing
- helps sole problems with payments/sales revenue
5
Q
what are the causes of cash flow problems?
A
- overtrading
- allowing too much trade credit to customers
- poor credit flow
- unforeseen costs
- inaccurate cash flow management
6
Q
improving cash flows
A
- SLOW DOWN OUTFLOWS
- delay payments to suppliers
- increase trade credits agreements with suppliers
- cut costs - SPEED UP INFLOWS
- early repayments by giving customers a discount
- reduce trade credit given to customers
- sell off stock at a discounted price to free up cash
- inject fresh capital into the business
7
Q
what are the BENEFITS of cash flow forecast?
A
- supports an application for lending
- helps decision making
- identify any potential shortfalls in cash
- ensures all costs are payed e.g. wages
- can assist in a business obtaining finance
8
Q
what are the LIMITATIONS of the cash flow forecast?
A
- inaccuracy
- figures are estimates and can be wrong - bias
- overinflate inflows
- underestimate outflows to make the business look better - updates
- needs regular updating or data becomes inaccurate
- some customers may not pay on time - unexpected events
- can disrupt forecast i.e. economic circumstances, social trends - focus
- no account made for profitability, productivity, efficiency
9
Q
net cash flow
equation
A
total cash inflows - total cash outflows
10
Q
closing balance
equation
A
net cash flow + opening balance
