Transcript of "1.13 cash flow forecasting (part 2) - moodle"
Do Now!Define…. Cash Flow Forecasting. Cash flow – is the flow of money in and out of the business.
Cash Flow ForecastingModule 3 – Will the business survive?
Learning ObjectivesBy the end of this lesson you should be able to:1. Identify the main reasons why a business will use a cash flow forecast.2. Discuss ways that a business can remedy negative cash flow forecasts.3. Identify the limitations of using cash flow forecasting.
Re-cap – The importance of cash flowWhy is cash important? Able to pay suppliers/ creditors on time. Avoid insolvency or liquidation! Able to pay staff wages/ salaries etc.
Why do businesses forecast cash flow?Why? Identify areas of negative cash flow. Used as part of business proposals i.e. – investment/ credit.Negative Cash Flow? Plan for additional finance needs e.g. – overdraft, loan, owners capital. Look at ways to reduce outflow e.g. – cheaper suppliers, less sales on credit – only cash, redundancies, better timed purchases.
Cash flow forecast – are there any limitations?Limitations? Mistakes can be make in preparation – inexperienced entrepreneur. Unexpected costs – increase in fuel prices, raw materials. Poor judgements/ assumptions – lack of market research. It’s a forecast – can it always be accurate?
Practice makes perfect!Complete the cash flow forecast… Can you identify any key points? Does the business have any issues of negative cash flow? What recommendations would you make?
Finally….How much do you know about Cash FlowForecasting? Try the quiz to test your knowledge.
Learning ObjectivesYou should now be able to:1. Identify the main reasons why a business will use a cash flow forecast.2. Discuss ways that a business can remedy negative cash flow forecasts.3. Identify the limitations of using cash flow forecasting.
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