Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
• Class : Y11
• Lesson Topic: Finance
• Scheme of Work: Cash flow
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Lesson Objectives
ALL (KNOWLEDGE)Define and describe a cash flow statement
MOST (ANALYSIS) Examine and Analyse the sections of a cash flow statement
SOME (EVALUATION ) Evaluate the pros and cons & Justify your views on the usefulness of a cash flow statement.
P&DPlanning and
Data
Higher thinking
Skills
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Planning ToolsP&DPlanning and
Data
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Keyword Definition
Cash flow
Cash flow forecast
Inflow
Outflow
Liquids
Net cash flow
CONNECTIVES
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
CONNECTIVES for AnalysisCONNECTIVES for ApplicationCONNECTIVES for Evaluation
COMPARINGEqually…As with…Like…In the same way…Similarly…Even so…Likewise…CAUSE & EFFECT
Consequently… Due to…As a result… Therefore..Because of… Because…
CONCLUDINGFirstly… After…Secondly… Before…Overall… I believe…Finally… I think …In conclusion… it depends…To conclude… short term…Meanwhile… Long term…
CONTRASTINGAlthough… Except…Moreover… If…However… Yet…Apart from… Unless…Despite… As long as…
EMPHASISINGMost importantly…Significantly…Notably…Especially…Above all…In particular…Indeed…
QUALIFYINGDespite… Yet…As long as… Unless…Apart from… If…Moreover… Except…However… Although…
ADDINGIn addition… And…Too… Also…Additionally… As well as…Furthermore…
ILLUSTRATINGFor instance… Such as…In the case of… So…For example…As revealed by…As illustrated by…
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Climb the LadderA-A*
1. To what extent 2. Do you think3. Evaluate whether (8-10m) 10+ connectives & key words
C-B
1. Explain 2. Compare3. Analyse (5-8m) 5+ connectives & key words
E-D
1. Define 2. Describe3. Identify (2-4m) 2 + connectives & key words
ATDApply to
demonstrate
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Cash flow
• Cash is a liquid asset. Most accessible and transferable asset (compared to a building?). Like blood in your body.
• Many start up businesses fail because of lack of CASH, not profit.
• Businesses must manage their cash flow to ensure that they have cash available when it is required. This involves:
• Estimating inflows & outflows of cash
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Cash flow management • REDUCE OUTFLOWS, INCREASE INFLOWS.
• Reducing the amount owed by creditors – cash sales, repayment incentives, factoring
• Negotiating payments ON DEBTS. • Leasing and renting instead of buying.
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Negative cash flow• This is when on a particular month you spend more than you
receive.• Not a problem if this happens just a couple of times.• Might mean you need to arrange an overdraft or stop buying
things.• Can be a problem if it is every month as it means you have NO
money.
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Cash flow DOES NOT show profit
• If you end up with a positive figure at the end of the month this does not mean you have made a profit.
• It just looks at the flow of money on a monthly basis.
• Can a profitable business have negative cash flow?
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Can a profitable business have negative cash flow?
Yes, This may be due to: Slow payment by creditors (trade credit)Delay between the purchase of materials and payment
from customer – e.g. constructionLarge capital purchases must be paid for in cash but are
recorded on the profit and loss account over several years
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Some useful equations
Cash inflow greater than cash outflow = (+ )cash flow
Cash inflow less than cash outflow = ___ cash flow
Cash inflow – cash outflow = Net cash flow
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Figures in £ 000’s
April 2015 May 2015
CASH INFLOWS Wedding party fees 60,000 Same Celebrity appearances 15,000 - 20% Share capital 20,000 -10% TOTAL CASH INFLOWS CASH OUTFLOWS Launch party 8,000 +14%Marquee hire 12,000 SameParty supplies 6,000 SameAdvertising at polo 4,000 +15%
Wardrobe and make-up 4,000 -6%
Holiday in Dubai 7,000 +7%
TOTAL CASH OUTFLOWS
Net cash flow
• For April 2015– Calculate – Inflow,– Outflow,– Net cash flow
• Extension calculate for May.
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Opening & Closing Balance • Opening balance is the money a business has at the start of
each month.
• Closing balance is the money at the end of each month (opening balance + net cash flow)
• New opening balance is same as old closing balance.
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
• Calculate;
• Feb closing balance
• March opening balance
• April closing balance.
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Forecasting • HOW? • Look at past data• Research other businesses• Look at secondary data on spending habits
• WHY? • You need to estimate your income – all the money flowing in• You need to estimate your expenditure – all of the money
flowing out• CASH ENSURES SURVIVAL!
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Keyword Definition
Cash flow
Cash flow forecast
Inflow
Outflow
Liquids
Net cash flow
CONNECTIVES
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
Lesson Objectives
ALL (KNOWLEDGE)Define and describe a cash flow statement
MOST (ANALYSIS) Examine and Analyse the sections of a cash flow statement
SOME (EVALUATION ) Evaluate the pros and cons & Justify your views on the usefulness of a cash flow statement.
P&DPlanning and
Data
Higher thinking
Skills
Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
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Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
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Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
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Business Section: Finance Further Reading C.29
Keywords – cash flow, forecast, inflows, outflows, liquid, net cash flow.
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