CASH-FLOW FORECASTING AND WORKING

CAPITAL
WHY IS CASH IMPORTANT TO A BUSINESS?

Paying liabilities (current

and non-current)
Pay Wages
Pay materials and suppliers
CASH-FLOW REFERS TO THE FLOW OF MONEY IN AND OUT OF A
BUSINESS

 INFLOWS  OUTFLOWS

 Revenue  Suppliers
 Capital injections  Rent and wages
 Grants  Services and amenities
 Taxes and deductions
 JAN FEB MAR APR MAY JUN
Cash Inflow
Revenue 12 14 14 18 26 29
Total Inflow 12 14 14 18 26 27
Cash outflows
Payments 16 18 18 20 20 22
Total 16 18 18 20 20 22
Net Cash Flow (-4) (-4) (-4) (-2)
Opening balance 10 6 2 (-2)
Closing balance 6 2 (-4) (-4)

ACTIVITY 20.2
ACTIVITY 20.3
MONTH 1 MONTH 2 MONTH 3 MONTH 4
WORKING CAPITAL CYCLE

SALES ON
CASH
CREDIT

PRODUCTION INVENTORY