3.7 cash flow

cash flow

amount of money flowing in and out of a business

reason for cash flow forecasts

for banks and lenders to assess financial health, help anticipate liquidity issues, facilitate business planning

investment

spending on capital or productive assets such as machinery

overborrowing

larger proportion of capital raised through external sources

overstocking

holding too much stock, wasting money

4 ways to fix cash flow problems

increase (e.g loans), decrease (e.g rental price), speed up (time given to customers to pay), slow down (time to pay suppliers)

what part of a cash flow forecast do you talk about in exams

closing balance line - split into sections

disadvantages of cash flow forecasting

changes in economy will affect numbers, changes in customer taste may affect sales, inaccurate market research leads to unreliable results, uncertainty