Topic 8- Financial Forecasting & Planning Flashcards
What is business planning?
Business planning plays a huge role in modern corporate life where they tackle everything including cash flows, short-term and long-term plans for profitability
It requires regular evaluation and updates
Why do you need a business plan?
- Organization & management of a business
- Creates a physical plan that is used to generate finance
- Incorporates various elements of a business idea
- Financial planning plays a small part in a bigger business plan, which is focused around cash flow forecasting
What is the business planning process?
Start-ups: Essential when plan is first proposed to inside and outside parties for funding
Existing businesses: Essential for long-term planning & management jurisdiction
What is financial planning?
The procedure that involves the management decision of what type of investment the firm requires and how they plan to finance it
What is the financial plan?
An exact plan indicating the investments the firm plans to make and their intention of how it will finance them
Why is cash important?
- Even profitable companies can fail without sufficient cash flows
- To support companies activities in order to ensure the long-term plan of shareholders wealth maximization
What are the objectives of cash managements?
- Liquidity
- Safety
- Return
- Flexibility
What are cash inflows?
- Payments from debtors
- Borrowing of a firm
- Interest income
What are cash outflows?
- capital investments
- payments made on borrowing
- tax, dividend, interest payments
- payments made to creditors
What is a cash budget?
A cash budget is a written record produced to support the business’ management of their cash flows. It is produced in advance to highlight all the planned inflows and outflows for a specific period
