Cash Flow

• What are the reasons for using a cash flow forecast?

  • To identify potential cash flow problems in advance
  • To make sure that there is sufficient cash available to pay payables and to make other payments
  • When going to banks to ask for loans - business plan
  • To avoid the possibility of the company being forced into liquidation  because of a shortage of finance to pay debts
• What is cash flow forecasting?

  The process of estimating the expected cash inflows and outflows over a period of time
• What is liquidation?

  Closing down a business and selling off its assets to pay creditors.
• What is a cash flow statement?

  A description of how cash actually flowed into and out of a business during a particular period of time
• What are the possible causes of cash flow forecast inaccuracies?

  • Changing demand levels e.g. seasonality
  • Innacurate market research
  • Actions of rivals e.g. new entrants to the market
  • Customers or suppliers failing