Cash Flow Forecast 2

What is the meaning of cash flow?

• Money coming in and going out

• Money used for day to day running of the business

• Difference between sales revenues and costs

• Stock of cash within the business

What is the difference between cash and profit?

• Money used for day to day running of the business & Difference between sales revenues and costs

• Stock of cash within the business

• Difference between sales revenues and costs

• Money coming in and going out

What are the uses of cash flow forecasts?

• Identifying possible future cash flow problems

• Setting targets

• Improving stock control efficiency

• Making credit periods for customers shorter

What are the limitations of cash flow forecasts?

• The future can't be predicted with certainty

• Cash can be released through stock

• Cash can be managed better by using cash flow forecasts

• Cash flows in from sales

What is the formula for calculating profit?

• COGS = Opening inventories + Purchases - Closing inventories

• Gross Profit = Sales revenue - Cost of good sold (COGS)

• Profit = Sales revenue - Total costs

• Closing Cash Balance = Opening cash balance + [cash inflow - cash outflow]

What is shown when the closing cash balance is negative?

• Income from sales

• Cash inflow - cash outflow

• Opening cash balance

• Figure in brackets

What are the consequences of poor financial planning?

• Increased debt

• Failure to meet financial goals

• Difficulty in managing expenses

• Unforeseen financial crises

How can cash be released through stock (inventories)?

• Making credit periods for customers shorter

• Keeping smaller inventory levels

• Using cash flows forecasts to predict problems/excesses

• Offering discounts for prompt payments

What is a source of working capital?

• Property payments (lease/rent)

• Cash sales

• Bank loan

• Labor

A payment from a company to its supplier represent a cash outflow for the company

• True

• False