cash flow forecast
M1- In this assignment I will be writing notes to accompany the cash flow forecast. I will be explaining to Sharma and Ryan why a business in general might experience cash flow problems, why this can cause difficulties and any potential dangers I can see specific to SIGNature’s cash flow forecast.
What is a cash flow and the purpose of it?
A cash flow is a measure o the money coming into the business and the money going out of the business on a regular basis. A cash flow forecast predicts in advance what the inflows and outflows might be. It is vital for every business to have a healthy cash flow for survival. It provides information about the business’s gross receipts and payments. Receipts are the money that is received by the business by the owner, investors, customer sales and payments are the money that is spend by the business on as a capital and revenue expenditure. The cash flow statement doesn’t just include investing, and financing activities it also includes the amount of interest paid, the amount of income taxes paid, and any significant investing and financing activities which did not require the use of cash.
General cash flow problems
Any business can experience cash flow problem depending on their cash inflows and outflows. A business might find it difficult to pay its revenue expenditures if their revenue income is low or decreasing. If the business’s outflows are greater than their opening balance and the inflows problems may occur resulting in a negative closing balance for that particular month. This is a problem as the business will not be able to make payments. They might fail to look at their financial statements until problems become too huge to handle. They might be spending more than they are earning for example making large payments for new materials, equipment when there is a seasonal drop in their sales. Some new businesses may experience cash flow problems because they have yet to build up reserves owned by their business. Other
What is a cash flow and the purpose of it?
A cash flow is a measure o the money coming into the business and the money going out of the business on a regular basis. A cash flow forecast predicts in advance what the inflows and outflows might be. It is vital for every business to have a healthy cash flow for survival. It provides information about the business’s gross receipts and payments. Receipts are the money that is received by the business by the owner, investors, customer sales and payments are the money that is spend by the business on as a capital and revenue expenditure. The cash flow statement doesn’t just include investing, and financing activities it also includes the amount of interest paid, the amount of income taxes paid, and any significant investing and financing activities which did not require the use of cash.
General cash flow problems
Any business can experience cash flow problem depending on their cash inflows and outflows. A business might find it difficult to pay its revenue expenditures if their revenue income is low or decreasing. If the business’s outflows are greater than their opening balance and the inflows problems may occur resulting in a negative closing balance for that particular month. This is a problem as the business will not be able to make payments. They might fail to look at their financial statements until problems become too huge to handle. They might be spending more than they are earning for example making large payments for new materials, equipment when there is a seasonal drop in their sales. Some new businesses may experience cash flow problems because they have yet to build up reserves owned by their business. Other