1. Honori Yamada
IB Business SL Yr.2 Prd: 2
October 30, 2011
CASH FLOW FORECAST: FOOTY FANATICS Ltd
Dave Ferguson is the manager of Footy Fanatics Ltd. The business makes and sells footballs for local school football teams. Dave is
compiling he cash flow forecast for the next 6 months and is not expecting any surprises. Sales are good, although as usual they are better
in the winter than during the summer.
Task: Using the information in the boxes below complete the cash flow forecast at the bottom of the page. Then evaluate the cash flow
“position” of the firm:
Sales for: January £190,000 Materials for: January £60,000
February £190,000 February £60,000
March £180,000 March £55,000
April £170,000 April £50,000
May £150,000 May £45,000
June £140,000 June £45,000
The following are the same amount for each month:
Wages / Salaries£100,000 Rent£500 Misc£200 Electricity£150
Repairs£500 Stationary£100
Telephone£200 Advertising£2,000 Insurance£250
JAN (£) FEB (£) MAR (£) APR (£) MAY (£) JUN(£)
OPENING £10,000 £36100 £62200 £83300 £99400 £100.500
BALANCE
CASH INFLOW
Sales £190,000 £190,000 £180,000 £170,000 £150,000 £140,000
TOTAL INCOME £190.000 £190.000 £180.000 £170.000 £150.000 £140.000
CASH OUTFLOW
Materials £60,000 £60,000 £55,000 £50,000 £45,000 £45,000
Wages / Salaries £100,000 £100,000 £100,000 £100,000 £100,000 £100,000
Rent £500 £500 £500 £500 £500 £500
Misc £200 £200 £200 £200 £200 £200
Electricity £150 £150 £150 £150 £150 £150
Repairs £500 £500 £500 £500 £500 £500
Stationary £100 £100 £100 £100 £100 £100
Telephone £200 £200 £200 £200 £200 £200
Advertising £2,000 £2,000 £2,000 £2,000 £2,000 £2,000
Insurance £250 £250 £250 £250 £250 £250
TOTAL OUTFLOW £163.900 £163.900 £158.900 £153.900 £148.900 £148.900
NET CASHFLOW £26100 £26100 £21100 £16100 £1100 (£8900)
CLOSING £36100 £62200 £83.300 £99.400 £100.500 £91600
BALANCE

2. Honori Yamada
IB Business SL Yr.2 Prd: 2
October 30, 2011
1. What significant conclusions can be drawn from this chart about the cash flow
situation of Footy Ltd? (4 pts)
Throughout the six months period of recording Footy Fanatics Ltd.’s cash flow forecast, it can
clearly be stated that Footy Fanatics Ltd. is gradually increasing its profits. Although their
revenue, or the sales, is decreasing by every £10,000 per month due to its external factors of
summer always decreasing in sales, Footy Fanatics Ltd. is still greatly managing to make profit. In
fact, their increase in their profit or their total outflow is doubled each month. By examining the
financial document, each month Footy Fanatics Ltd.’s material costs have been decreasing. Also,
on top of their costs being decreasing each month, Footy Fanatics Ltd. has managed to make profit
from the beginning of the month, thus increasing their closing balance that will positively add on
to its following months. Therefore, it can be concluded that although Footy Fanatics Ltd. is
temporarily losing sales, they are not likely to face cash deficiency any time soon since their
material costs have been gradually decreasing and they still manage to make overall profit.
2. What specific recommendations would you make to the firm? (5 pts)
I would recommend Footy Fanatics Ltd. to continue maintaining its overall increase in its
profit. Although Footy Fanatics Ltd. is making profit each month, it would be even better for them
to be able to maintain its sales throughout the year. Since external factors such as temporary
seasonal effects can be hard to control, the best way for the firm to improve their sales revenue is
possibly by improving their product portfolio. Since Footy Fanatics probably only sells footballs to
local schools, and if they know that sales are always better during winters than summers, then this
could negatively impact the firm. Footy Fanatics should sell a wider range of other sporting
products that might not be affected by the seasonal change. Though coming up with a new product
portfolio requires a vast amount of time and cost into remarket planning, researching, and
additional material costs, it is still one of their possibilities to improve their sales.
Another approaches they may take in order to increase sales would be finding alternative
suppliers and to possibly target not only for local schools, but also for national teams or other
football organizations. This will give them more opportunity and flexibility in making sales since
the more suppliers, the more Footy Fanatics are likely to sell their products.
Keep in mind….Total income and net cash flow represent the cash flow for the month only. This figure does NOT include the opening balance. The closing
balance at the end of the month DOES include the opening balance. The closing balance becomes the opening balance for the next month. Negative numbers
are always placed in parenthesis.