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FORECASTING CASH FLOWS
LO: TO UNDERSTAND THE PURPOSE AND FUNCTIONS OF A CASH FLOW FORECAST
THE CASH FLOW FORECAST
A business will estimate;
• How much it will sell• How much it will cost to make what is sold• How much fixed costs will be
A business then makes sure it has enough cash.
This is done using a cash flow forecast.
Lo: To understand the purpose and functions of a cash flow forecast
INFLOWS • Sales Revenue- received from customers
• Capital- received from selling assets
• Grants – received from the government
• Loans – received from banks
LO: To understand the purpose and functions of a cash flow forecast
OUTFLOWS• Wages
• Equipment
• Raw materials
• Tax
• Rent
• Utilities Telephone, gas, electricity LO: To understand the purpose and functions of a cash flow forecast
THE CASH FLOW FORECAST
A cashflow summarises the money going in and out of a business.
Each month has a separate column
Each column is split into three sections.
SECTIONS OF A CASHFLOW
TASK
Monsters Mint cash flow
Cash flow quiz
Cash flow mock.
IMPORTANCE OF CASHFLOW • The business
cannot survive without cash
• A business needs cash on a day-to-day basis
• A business is most likely to close if it has no cash.
CASHFLOW PROBLEMS
More cash leaving the business than is going in
An accumulation of negative cash flow.
WHAT AFFECTS CASH FLOW?• Sales can change
• Costs can change
• Credit terms can change
• Stock levels can change
RULES OF CASH FLOW
EXAM QUESTION