Planning

• What is the amount of the loan mentioned?

  £10,000
• Why might a bank ask what the loan will be used for?

  To assess the purpose of the loan
• What does a bank want to know about the borrower's ability to repay?

  Are they able to pay me back?
• What are the main things a bank may ask before loaning £10,000?

  What are they going to use it for, are they able to pay it back, what is their credit score, and how much do they think they will make
• Why is it important for a business to create a cash flow forecast?

  To predict the cash coming in and going out, prevent negative cash flow and insolvency, and ensure they can pay suppliers, overhead and employees
• What are the main inflows and outflows in a cash flow forecast?

  Inflows: bank loan, sales revenue. Outflows: wages, purchasing stock, rent, equipment, telephone bill, taxes
• What is the difference between cash and profit?

  Cash is money the business has access to right away, while profit is the difference between revenue and costs
• How do you calculate the closing balance in a cash flow forecast?

  Closing balance = Net cash flow + opening balance
• What is the main reason for business failure according to the passage?

  Negative cash flow (deficit)
• What are the key contents of a business plan?

  • Overview
  • Objectives (for banks or investors)
  • Market research
  • Employees
  • Finances
  • Production
• How can a business plan help a company?

  • Gain finance
  • Reduce risk of failure
  • Provide focus and direction
• How do the functions of cash and profit differ for a business?

  Cash is money the business has access to right away, while profit is the difference between revenue and costs
• What is the definition of insolvency?

  When a business can no longer pay its debts or staff wages because it has no cash
• How do you calculate net cash flow in a cash flow forecast?

  Net cash flow = Total inflows - Total outflows
• What is the opening balance in a cash flow forecast?

  The same as the previous month's closing balance
• What are the key differences between cash and profit for a business?

  • Cash is money the business has access to right away, while profit is the difference between revenue and costs
  • A business may have positive profit but negative cash flow, leading to insolvency
  • Cash flow forecasting is crucial to prevent negative cash flow and ensure the business can pay its obligations
• How can a business differentiate itself from competitors according to the passage?

  By identifying how their business will be different from similar businesses in the market
• What is the main purpose of a cash flow forecast according to the passage?

  To prevent business failure by predicting cash inflows and outflows
• If a business has a negative cash flow, what is the main risk it faces?

  Insolvency, where it can no longer pay its debts or staff wages
• How can a cash flow forecast help a business avoid failure?

  • Predicts cash inflows (receipts) and outflows (payments)
  • Helps identify and prevent negative cash flow (deficits)
  • Ensures the business can pay suppliers, overhead, and employees
  • Prevents the business from becoming insolvent and unable to pay its debts
• What is the main purpose of a business plan according to the passage?

  To gain finance and reduce the risk of business failure
• How can a business plan help a company succeed?

  • Provides focus and direction for the business
  • Helps gain financing from banks or investors
  • Reduces the risk of business failure
• What are the key components of a cash flow forecast?

  Inflows (bank loan, sales revenue) and outflows (wages, purchasing stock, rent, equipment, bills, taxes)
• How does the concept of cash differ from the concept of profit for a business?

  Cash is the money the business has access to right away, while profit is the difference between revenue and costs
• What are the key differences between cash and profit for a business?

  • Cash is the money the business has access to right away, while profit is the difference between revenue and costs
  • A business may have positive profit but negative cash flow, leading to insolvency
  • Cash flow forecasting is crucial to prevent negative cash flow and ensure the business can pay its obligations
• What is the main reason for business failure mentioned in the passage?

  Negative cash flow (deficit)
• How can a business plan help a company succeed?

  • Provides focus and direction for the business
  • Helps gain financing from banks or investors
  • Reduces the risk of business failure
• How can a cash flow forecast help a business avoid failure?

  • Predicts cash inflows (receipts) and outflows (payments)
  • Helps identify and prevent negative cash flow (deficits)
  • Ensures the business can pay suppliers, overhead, and employees
  • Prevents the business from becoming insolvent and unable to pay its debts
• What is the definition of insolvency according to the passage?

  When a business can no longer pay its debts or staff wages because it has no cash
• How do you calculate the closing balance in a cash flow forecast?

  Closing balance = Net cash flow + opening balance
• What are the key components of a cash flow forecast?

  • Inflows: bank loan, sales revenue
  • Outflows: wages, purchasing stock, rent, equipment, bills, taxes
  • Net cash flow = Total inflows - Total outflows
  • Closing balance = Net cash flow + opening balance
• What is the opening balance in a cash flow forecast?

  The same as the previous month's closing balance
• How can a business differentiate itself from competitors according to the passage?

  By identifying how their business will be different from similar businesses in the market
• What is the main purpose of a cash flow forecast according to the passage?

  To prevent business failure by predicting cash inflows and outflows
• How can a business plan help a company succeed?

  • Provides focus and direction for the business
  • Helps gain financing from banks or investors
  • Reduces the risk of business failure