Business Studies – 5.2.1 The importance of cash and cash flow forecasts | e-Consult
5.2.1 The importance of cash and cash flow forecasts (1 questions)
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Calculation of Net Cash Flow:
Net Cash Flow = Total Cash In - Total Cash Out
Net Cash Flow = £4000 - (£1500 + £500 + £200) = £4000 - £2200 = £1800
Viability Assessment: The net cash flow of £1800 is positive. This suggests that Sarah's catering business idea has the potential to be viable in the short term, as it is expected to generate more cash than it spends in the first month.
Further Information Needed: To assess the business's overall viability, further information is needed, including:
- Detailed Cost Analysis: A more detailed breakdown of all costs, including potential unexpected expenses.
- Sales Forecast: A realistic sales forecast to assess the sustainability of cash inflows.
- Pricing Strategy: Information on the pricing strategy and its impact on profitability.
- Funding Sources: Details of how the business will be funded and the associated repayment terms.
- Market Analysis: An understanding of the target market and the level of demand for the catering services.