1.29 Planning And Cash Flows Flashcards
(16 cards)
What is a business plan?
A formal document outlining objectives, strategies, financial projections, and operations of a business.
Why is a business plan important?
Helps secure finance, provides clarity, identifies risks, and increases business success.
What are the key components of a business plan?
Executive Summary, Business Opportunity, Buying & Production, Financial Forecasts, Business & Objectives, Market Analysis, Personnel, Premises & Equipment, Finance.
How does a business plan help in securing finance?
Lenders assess viability, investors see potential return, and it shows responsible planning.
What is a cash-flow forecast?
A financial statement predicting expected cash inflows and outflows over a period of time.
Why are cash-flow forecasts important?
Helps avoid cash shortages, ensures timely payments, supports borrowing, and identifies financial trends.
What are the key components of a cash-flow forecast?
Cash Inflows, Cash Outflows, Net Cash Flow, Opening Balance, Closing Balance.
How do you calculate net cash flow?
Net Cash Flow = Total Inflows – Total Outflows.
How do you calculate the closing balance?
Closing Balance = Opening Balance + Net Cash Flow.
What does a positive net cash flow indicate?
The business has more cash coming in than going out, indicating good liquidity.
What does a negative net cash flow indicate?
The business is spending more than it earns, leading to potential cash shortages.
What are common issues in cash-flow forecasts?
Seasonal variations, late customer payments, unexpected costs.
What factors can affect a cash-flow forecast?
Interest rates, economic conditions, exchange rate changes, consumer demand.
How can a business adjust a cash-flow forecast?
Reduce expenses, increase revenue, delay non-essential purchases.
How are cash-flow forecasts used in business?
Identifying cash shortages, supporting finance applications, improving planning, monitoring performance.
What are the limitations of cash-flow forecasts?
Estimates & assumptions, time-consuming updates, ignores profitability, affected by external factors.
