CASH-FLOW FORECASTSObjective

Prepare cash flow fore cast from given information

What is Cash- Flow?

The flows of money into and out of the business

•Money flows in through revenue from sales of service or product

•Money flows out when wages and expenses are paid or stocks are purchased

Cash InflowsExamples of inflows (receipts)

•Customers

•Local and national government grants

•Sale of property or equipment

•Loans

Cash OutflowsExamples of Outflows(expenses, payments outgoings)

•Expenditure= money spent by the business on•Wages and salaries for staff

•Raw materials or stock

•Gas, electricity, water and telephone

•Rent or mortgage

•Interest on loans

•Equipment purchases

Why do businesses use Cash-flow forecasts?

•Banks and other lenders need to assess the financial health of the business

•Helps managers anticipate and identify periods of cash deficiency

•Aids the planning process, and comparison with actual figures

The Calculations You Need to Know

•Total Income

•Total Expenditure

•Net Cash Flow is total income minus total expenditure

•Opening bank balance is the previous closing bank balance

•Closing Bank Balance is opening bank balance plus net cash flow