Understanding cash flow forecasts:

Cards (40)

  • Cash flow forecasting involves predicting both cash inflows and cash outflows.

    True
  • Cash flow forecasts help businesses prepare for both cash shortages and surpluses.
    True
  • Accurate cash flow forecasts are crucial for effective business decision-making.
    True
  • Cash flow forecasts allow businesses to predict and prepare for cash shortages and surpluses.

    True
  • What format for a cash flow forecast allows for detailed calculations and "what-if" scenarios?
    Spreadsheet
  • Cash flow forecasting helps businesses plan and manage their finances
  • Cash flow forecasts are essential for effective business decision-making and operations.

    True
  • What are examples of cash outflows for a business?
    Supplier payments and wages
  • Analyzing historical data is a method for preparing a cash flow forecast.

    True
  • To create an accurate cash flow forecast, it is essential to combine historical data with reasonable assumptions
  • The amount of cash a business starts with in a cash flow forecast is called the opening balance
  • An example of a cash inflow is sales revenue
  • Cash flow forecasts help identify periods where cash outflows may exceed cash inflows
  • What is predicted in cash flow forecasting to help businesses manage their finances?
    Cash inflows and outflows
  • Why is identifying a period of cash surplus important?
    To utilize excess cash
  • The closing balance is calculated by adding cash inflows to and subtracting cash outflows from the opening balance
  • Using historical data and reasonable assumptions is key to creating an accurate cash flow forecast.

    True
  • Match the example of a cash inflow with its type:
    Sales revenue ↔️ Cash inflow
    Supplier payments ↔️ Cash outflow
  • What do accurate cash flow forecasts enable businesses to do?
    Anticipate and respond
  • Cash flow forecasts help identify periods where cash outflows may exceed cash inflows
  • The amount of cash a business has at the beginning of the forecasting period is called the opening balance
  • The closing balance is calculated by adding cash inflows to and subtracting cash outflows from the opening balance
  • What is the purpose of making assumptions when preparing a cash flow forecast?
    To predict future events
  • What is the primary advantage of presenting a cash flow forecast in a spreadsheet format?
    Detailed calculations and scenarios
  • Cash flow forecasts are only useful for predicting cash surpluses, not shortages.
    False
  • What is the role of historical data in preparing a cash flow forecast?
    To identify patterns and trends
  • What is the purpose of cash flow forecasting?
    Predict future cash movements
  • What is an example of a cash outflow?
    Employee wages
  • What action might a business take if a cash flow forecast identifies a shortage?
    Secure additional financing
  • Supplier payments are an example of a cash outflow
  • Match the component of a cash flow forecast with its description:
    Opening Balance ↔️ Cash at the start of forecasting
    Cash Inflows ↔️ Money coming into the business
    Cash Outflows ↔️ Money leaving the business
    Closing Balance ↔️ Cash at the end of forecasting
  • Steps for preparing a cash flow forecast:
    1️⃣ Analyze historical data
    2️⃣ Make assumptions about future events
    3️⃣ Decide on forecasting time periods
  • Steps in responding to a cash shortage identified by a cash flow forecast:
    1️⃣ Identify the period of shortage
    2️⃣ Secure additional financing or delay payments
    3️⃣ Monitor cash flow closely
  • Cash flow forecasts help businesses predict and prepare for cash shortages and surpluses.
    True
  • What action can a business take if a cash flow forecast predicts a cash shortage?
    Secure additional financing
  • What are examples of cash inflows for a business?
    Sales revenue and loan proceeds
  • Steps for preparing a cash flow forecast
    1️⃣ Analyze historical data
    2️⃣ Make assumptions about future events
    3️⃣ Decide on the forecasting time periods
  • Match the cash flow forecast format with its description:
    Spreadsheet ↔️ Detailed calculations and scenarios
    Visual Dashboard ↔️ High-level, easy-to-understand overview
    Narrative Report ↔️ Includes explanations and commentary
  • Why do cash flow forecasts help businesses avoid cash shortages?
    By predicting outflows exceeding inflows
  • Using a combination of historical data and assumptions is crucial for an accurate cash flow forecast.

    True