2.1.4 - PLANNING

Question 1

What are 4 reasons why a Business writes a Business Plan

Answer 1

• to PERSUADE LENDERS that the BUSINESS will MAKE ENOUGH PROFIT to be able to PAY BACK
• to SET TARGETS and and OBJECTIVES that can be followed
• GIVES the OWNERS some DIRECTION
• CONTINGENCY PLANNING - what if analysis

Question 2

What is included in a business plan

Answer 2

• a CASH FLOW FORECAST - shows EXPECTED INCOME and EXPENDITURE of a business
  shows liquidity of the business

Question 3

What are the 4 MAIN PURPOSES of a business plan?

Answer 3

1. to HELP SET UP a NEW business
2. to HELP the business RAISE FINANCE
3. to HELP the business to SET OBJECTIVE
4. to OUTLINE how FUNCTIONS of the business will be organised

Question 4

What is the difference between Cash Inflow and Outflow?

Answer 4

Inflow is are income

Outflows are expenditure

Question 5

What are 2 Uses of Cash Flow Forecasts

Answer 5

• Helps CONTROL and MONITOR cash in and out of a business
• a GOOD cash flow FORECAST may HELP the owner to SECURE a BETTER DEAL on their FINANCE

Question 6

What are 3 Limitations of Cash Flow Forecasts?

Answer 6

• only a 12 month snapshot, VERY SHORT TERM to make any concrete decisions about the business
• ONLY A FORECAST
• owner may have OVERSTATE expenditure or UNDERSTATED income