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3.1 Cash Flow Forecasts – Unit 3: Investigating Financial Control

3.1 Cash Flow Forecasts

Unit 3: Investigating Financial Control

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Contents

Teacher’s notes included in the Notes Page

Flash activity (these activities are not editable) Printable activity

For more detailed instructions, see the Getting Started presentation

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Accompanying spreadsheet

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Cash flow forecasts

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Cash flow forecasts

In this section you will consider what cash flow forecasts are and why they are useful for businesses.

Cash flow

How cash flow forecasts are used by businesses

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Cash flow and cash balance

Cash flow is:

For a business to profit, more money needs to be flowing in than out.

the money coming into a business (the income or inflows)the money going out of a business (the expenditure or outflows).

A business needs to monitor its cash balance (the money remaining in the business’s bank account) over a specific period of time in order to see how much money is flowing in and out.

What is meant by the terms cash flow and cash balance?

As a class, discuss your own cash flow over the course of a typical week.

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It is a prediction of the future flows of money in and out of the business.

Cash flow forecasts

A cash flow forecast shows, month by month, the money that it is anticipated will be coming into the business and the money that the business will be paying out.

A cash flow forecast is used by businesses to calculate how much money they should have in the bank at any given time.

Why do you think it is useful for businesses to know this information?

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Cash flow forecasts

A cash flow forecast can be used to assess how a business's finances will fare over a specific period of time.

They are normally produced on

a monthly basis for either six or twelve

months ahead.

Businesses use cash flow forecasts because they allow a prediction of how much working capital they will have over the coming year.

What is meant by the term working capital?

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Uses of cash flow forecasts

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What a cash flow forecast looks like