Cash Flow Forecasts Flashcards

All 6 cards in this deck

What is a cash flow forecast?

A prediction of future cash inflows and outflows over a period of time, usually 12 months.

Give two examples of cash inflows in a cash flow forecast.

Money from sales, plus items such as rent received or a loan paid into the business.

Give two examples of cash outflows in a cash flow forecast.

Payments to suppliers and wages to employees, plus overheads such as rent and insurance.

What is the formula for net cash flow?

Net cash flow = total cash inflows − total cash outflows.

What are the steps to calculate total cash inflow for a month?
e.g. a shop sells 50 coats at £40 each and also receives £500 in rent

1. Work out the inflow from each source (units × price): 50 × £40 = £2000
2. Add all the inflows together: £2000 + £500 = £2500
   Total cash inflow = £2500

What are the steps to calculate the closing balance for a month?
e.g. total inflows £8000, total outflows £5000, opening balance £2000

1. Net cash flow = inflows − outflows: £8000 − £5000 = £3000
2. Closing balance = net cash flow + opening balance: £3000 + £2000 = £5000
   Closing balance = £5000