Business Studies Collins Revision Guide. - StudyGuide.PK

●●CASH FLOW FORECASTS (1)Cash flow is:■ inflows, money coming into a business■ outflows, money going out of a business.A cash flow forecast is a prediction of the future inflows andoutflows of money over a period of time, usually a year.Owners’ fundsEquipmentGrantsStockBank loanShare out of profitSales revenueWagesOther loansTax●●●On any particular day it is not very likely that the cash inflows willexactly equal the cash outflows. If there are more inflows then thebusiness is said to have a cash surplus. More outflows will give acash deficit.Many businesses that fail do not do so because their products arepoor or they are unprofitable. They do so because they do not haveenough money to pay their bills at that particular time.A cash flow forecast helps a business predict when it is likely tohave cash deficits. It is then able to plan for them by perhapstaking out a loan or arranging an overdraft to cover the period ofshortage. A bank manager would expect to see a cash flow forecastbefore agreeing to any loans.41