forecasting

• Why are cash flow forecasts useful during a recession?

  They help identify cash shortages or surpluses
• What can you discover by forecasting cash flow for the future?

  You may find cash shortages or excesses
• What does it indicate if outflows are less than inflows?

  It indicates a good cash flow situation
• What is an opportunity cost in terms of excess cash?

  It's the potential earnings from alternative uses
• What could you do with excess cash instead of leaving it in the bank?

  Invest it in a high-interest account
• What does a cash shortage indicate?

  Outflows exceed inflows
• What is a liquidity issue?

  A shortage of cash to meet obligations
• What information is typically included in a cash flow forecast?

  • Opening balance for each month
  • Cash inflows for each month
  • Cash outflows for each month
  • Closing bank balance at month-end
• What does a negative closing bank balance indicate?

  It suggests a cash flow issue
• How can anticipating cash flow issues help a business?

  It allows for proactive financial management
• What might a business consider if facing a cash flow shortfall?

  They might consider obtaining an overdraft
• What should a business do if cash flow issues persist over several months?

  Consider using a loan instead of an overdraft
• Why is it important to manage excess cash effectively?

  To avoid missing growth opportunities
• What are the key benefits of cash flow forecasting?

  • Identifies potential cash shortages
  • Highlights excess cash situations
  • Enables proactive financial decision-making
  • Helps manage liquidity issues effectively
• What is the main purpose of cash flow forecasts?

  To anticipate cash flow problems