Cash Flow forecast Flashcards
(8 cards)
1
Q
How to calculate net cash flow
A
Net cash flow = inflows - outflows
2
Q
How to calculate closing balance
A
Closing balance= net cash flow + opening
3
Q
How to calculate opening balance
A
Opening balance is equal to last months closing balance
4
Q
The causes of cash flow problems
A
- Overtrading
- Allowing too much trade credit to customers
- Poor credit control
- Inaccurate cash-flow management
- Unforseen costs
5
Q
Ways to speed up inflows
A
- Reduce trade credit given to customers
- Sell off stock at discounted price
- Inject fresh capital into the business
6
Q
Ways to slow down outflows
A
- Delay payments to suppliers
- Increase trade credit agreements to suppliers
7
Q
Benefits of cash-flow forecasting
A
+ To support an application for lending
+To support the budgeting process
+To identify any potential cash flow crisis
8
Q
Limitations of cash-flow forecasting
A
- Some figures will be based on estimates
- Variables are constantly changing, must be updated to be valid
- They only focus on one variable (cash) & don’t consider other important variables
