Cash flow and cash flow forecasting

Q1 Calculation time - cash flow forecast

Jan Feb Mar

CASH INFLOWS

Investment 10,000 0 0

Sales 2,500 10,000 15,000

Total inflows 12,500 10000 15,000

CASH OUTFLOWS

Raw materials 4,000 5000 5,000

Wages & salaries 3,500 4,000 4,000

Marketing 2,500 1,000 2,000

Set-up costs 3,000 1,000 0

Other costs 2,000 1,000 1,000

Total outflows 15000 12,000 12,000

NET CASH FLOW -2,500 -2,000

Opening balance 0 -4,500

Closing balance -4,500 -1,500

Fill the gaps in this Cash Flow Forecast for a new business:

Q2 Briefly explain two reasons why businesses forecast cash flow

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Cash flow and cash flow forecasting

Q3 What’s the difference?

What’s the difference between

1 Payables and Receivables

2 Cash flow and Profit

Q4 Analyse this

1 A business decides to delay the time it takes to pay its suppliers

2 A business decides to reduce the time it allows customers to pay from 30 days to 14 days

3 A business takes 30 days on average to pay its suppliers (payables) and it takes on average
42 days for the businesses customers to pay (receivables)

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