Cash flow forecasts E1 Cash flow forecasts Do you

Transcript:Cash flow forecasts E1 Cash flow forecasts Do you:
Cash flow forecasts E1 Cash flow forecasts Do you agree with these quotes? “Sales for vanity, profit for sanity but cash is king” “Profitable businesses can still go under if they run out of cash at a critical moment. Forecasting is the most focused method of avoiding that obstacle.” Peter Jones Cash flow forecasts In this topic you will learn about Inflows/receipts Cash sales Credit sales Loans Capital introduced Sale of assets Bank interest received Outflow/payments Cash purchases Credit purchases Rent Rates Salaries Wages Utilities Purchase of assets Value Added Tax (VAT) Bank interest paid Prepare, complete, analyse, revise and evaluate cash flow Use of cash flow forecasts for planning, monitoring, control, target setting Benefits and limitations of cash flow forecasts The nature of cash flow Cash flows into AND out of a business Cash sales Payments from debtors Owners’ capital invested Sale of assets Bank loan Purchasing stock Paying wages Paying debts – bank loans, creditors Purchasing assets Cash flow is interested in the balance between these cash inflows and cash outflows in terms if their relative size and timings. cash flow forecasts Cash flow is important to a business as it needs to ensure a positive cash balance in order to be able to meet day to day expenses A cash flow forecast is a forward looking statement that tries to predict cash inflows and outflows in the future Cash flow forecasts are an important part of a business plan A cash flow statement is a backward looking statement that shows what happened to cash inflows and outflows Cash flow statements are normally presented as a part of a business’ accounts A potentially profitable business may fail because it has cash flow problems Before looking at this link try to list up to 11 common reasons why small businesses fail. At which number are you going to put running out of cash? Cash flow forecasts Cash inflows/receipts Money flowing into the business: Cash sales Credit sales Loans Capital introduced Sale of assets Bank interest received You have already covered all of these terms. Write a sentence for each term explaining how it allows cash to flow into a business. Cash flow forecasts Cash outflows/payments Money flowing out of the business: Cash purchases Credit purchases Rent Rates Salaries Wages Utilities Purchase of assets Bank interest paid You have already covered all of these terms. Write a sentence for each