forecasting cash flows lo: to understand the purpose and functions of a cash flow forecast
TRANSCRIPT
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FORECASTING CASH FLOWS
LO: TO UNDERSTAND THE PURPOSE AND FUNCTIONS OF A CASH FLOW FORECAST
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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
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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
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OUTFLOWS• Wages
• Equipment
• Raw materials
• Tax
• Rent
• Utilities Telephone, gas, electricity LO: To understand the purpose and functions of a cash flow forecast
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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.
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SECTIONS OF A CASHFLOW
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TASK
Monsters Mint cash flow
Cash flow quiz
Cash flow mock.
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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.
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CASHFLOW PROBLEMS
More cash leaving the business than is going in
An accumulation of negative cash flow.
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WHAT AFFECTS CASH FLOW?• Sales can change
• Costs can change
• Credit terms can change
• Stock levels can change
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RULES OF CASH FLOW
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EXAM QUESTION