Cash-flow Forecasting and Working Capital (Copy)
- Why is cash important
- Liquid asset
- Immediately useable for spending
- Cash flow means inflows and outflows of cash
- Cash flow issues will result in issues with workers, government and expenses
- Production halts
- Liquidation may occur
- Cash flows
- Inflows
- Sale for cash
- Payment by debtors
- Borrowing money
- Sale of assets
- Investment from investors
- Outflows
- Purchase on cash
- Wages
- No Current Assets purchased
- Repaying loans
- Paying creditors of the business
- Inflows
- Cash Flow Cycle
- Need cash to pay for stuff
- Materials wages and rent etc
- Goods are produced
- Products sold
- Cash received for the products sold
- Then again used to pay for stuff
- Importance of cash flow forecasts
- Cash available for paying bills
- Cash in the bank
- Too much cash is not good, it should be invested or used to pay off loan
- Use of cash flow forecasts
- Starting up a business so business can get investment and loans
- Bank manager can be informed about the requirements
- Managing existing business requirements
- Cash flow is managed as well
- Short term cash issues solved how?
- Take loan
- Usually available quick
- But requires interest and repayment
- Delay supplier payment
- Cash outflow decrease
- Suppliers can get angry and an not offer discounts in the future
- Debtors asked for quicker payments
- Short-term flow increase
- Customers may shift to other businesses
- Delay or cancel capital purchases
- Long-term efficiency reduced
- Cash outflows can decrease
- Take loan
- Working capital importance
- Cash needed to pay day to day costs and buy inventories
- Value of firm’s debtors related t volume and sales
- Value of inventories will change
