Business - Unit 5: Finance - 5.5
- Created by: TabithaP2019
- Created on: 24-10-19 18:34
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- 5.5 - Cash flow forecast
- Importance of cash to a business
- Pay expenses and short-term debts
- e.g. salaries, rent, suppliers
- Provide liquidity for the business
- Liquidity = the ability of a business to turn assets into cash
- Pay expenses and short-term debts
- What is cash?
- The money held in bank accounts and on the premises
- Used to pay short-term debts and expenses
- Cash flow forecasts
- They try to predict the amount of cash a business will have over a year/several months
- Use past data to make predictions on sales etc.
- Link to website on cash flow forecasts
- Uses of cash flow forecasts
- Business planning - needed to show banks so they will give a loan
- Anticipating when there will be cash shortage - measures can be arranged to prepare e.g. overdraft
- Setting achievable and useful targets to improve its financial health
- Limitations of cash flow forecasts
- It is only a prediction so cannot be certain
- Needs updating often to be useful and as accurate as possible
- Does not consider competitor activity etc.
- Importance of cash to a business
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