Cash Flow Forecast

A cash flow statement shows an overview of money flowing in and out of a company

• True

• False

Which of the following is an example of a cash in-flow for a business?

• payment to suppliers
• paying back a loan to a bank
• payment from debtors
• purchase of fixed assets

Which of the following is an example of a cash out-flow for a business?

• payments to creditors
• sale of goods
• payment from debtors
• receiving a loan from the bank

Which of the following is NOT a use of cash-flow forecasts?

• They indicate how much cash is available for paying bills
• They show how much the bank needs to lend to stop insolvency
• They indicate whether the business is holding too much cash
• They indicate how much profit the business will make

A firm is forecast to have a negative closing bank balance. Which would reduce the problem?

• sell more goods on 4 months credit
• produce more goods
• ask customers to pay in cash and not sell goods on credit
• ask suppliers if the firm can pay for goods in cash

If a cashflow forecast suggests that a firm will run out of cash, which would help the problem?

• purchase more fixed assets
• repay a bank loan
• pay suppliers immediately
• delay paying suppliers

The monthly net cash flow for a business is calculated by:

• sales revenue - cost of goods sold
• total cash in - total cash out
• total cash out - total cash in
• total cash in - cost of goods sold

The closing bank balance is calculated by:

• opening bank balance + cash out-flow
• opening bank balance + cash in-flow
• opening bank balance + net cash flow
• net cash flow + gross profit

What is the money available to pay for day to day operational costs called?

• Cash

• Working capital

• Profit

• All of the above

Assume a firm sells goods costing £40,000 for £55,000. It provides the customer

with 70% trade credit (i.e. the customer pays only 30% of the price as a down

payment). The profit earned is __________, and the cash received is _________.

• £15,000, £12,000

• £15,000, £16,500

• £15,000, £28,000

• £15,000, £55,000