Practice Flashcards
Flip to reveal answersJan: Inflows $8k, Outflows $9k, Opening $3k. Closing?
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All 25 Flashcards — Cash flow forecasts
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Question
Jan: Inflows $8k, Outflows $9k, Opening $3k. Closing?
Answer
Net = −$1k. Closing = $3k + (−$1k) = $2,000. Negative net but opening covers it.
💡 Hint
3k + (-1k) = 2k
Question
Cash flow forecast structure in order?
Answer
Inflows → Outflows → Net cash flow → Opening balance → Closing balance
💡 Hint
I-O-N-O-C
Question
Name three limitations of cash flow forecasts
Answer
Based on predictions not facts, unexpected costs arise, external shocks unpredictable.
💡 Hint
Predictions, surprises, shocks
Question
Three sections of a cash flow forecast?
Answer
1) Cash inflows, 2) Cash outflows, 3) Net cash flow + Opening/Closing balances.
💡 Hint
Inflows → Outflows → Balances
Question
What is a cash flow forecast?
Answer
A prediction of expected cash inflows and outflows over a future period — usually 12 months, month by month.
💡 Hint
Future cash prediction
Question
What is the most important number in a forecast?
Answer
Closing balance — negative means the business will run out of cash that month.
💡 Hint
Closing balance
Question
Why create a cash flow forecast?
Answer
To anticipate cash shortages and plan ahead — arrange finance before problems hit.
💡 Hint
Plan for shortages
Question
Rule for amending a forecast?
Answer
Change ONLY affected figures, recalculate net cash flow and closing balance. Don't touch unaffected figures.
💡 Hint
Only change what's impacted
Question
Why might a forecast give false security?
Answer
Overly optimistic assumptions make it look good, but reality may be much worse.
💡 Hint
Optimism ≠ reality
Question
Negative closing balance signals what?
Answer
Potential cash crisis — business will run out of money and needs urgent action.
💡 Hint
Cash crisis ahead
Question
Name two uses of a cash flow forecast
Answer
Identify low-cash months, and support loan applications/investor pitches.
💡 Hint
Spot problems + secure funding
Question
A forecast is a ___, not a guarantee
Answer
Plan — smart businesses update regularly as new information comes in.
💡 Hint
Plan, not guarantee
Question
'Sales increase 10% in March' — how to amend?
Answer
Increase March inflows by 10%, recalculate March net CF and closing. Leave other months alone.
💡 Hint
Adjust inflows → recalculate
Question
How is net cash flow calculated in a forecast?
Answer
Total inflows − Total outflows for that month.
💡 Hint
Inflows minus outflows
Question
Three forecast exam skills?
Answer
Complete missing figures, amend for changes, interpret results.
💡 Hint
Complete + amend + interpret
Question
How is closing balance calculated?
Answer
Opening balance + Net cash flow
💡 Hint
Opening + net
Question
Quick: Closing balance = ?
Answer
Opening balance + Net cash flow
💡 Hint
Opening + net
Question
A cash flow forecast is like checking the ___ before a hike
Answer
Weather forecast — prepare for bad conditions before they happen.
💡 Hint
Be prepared!
Question
Negative net cash flow in January — out of cash?
Answer
Not necessarily — a large opening balance can cover it. Check the CLOSING balance.
💡 Hint
Opening may cover it
Question
How can external shocks undermine forecasts?
Answer
Recessions, pandemics, new competitors make all predictions wrong.
💡 Hint
Uncontrollable events
Question
What makes a good cash flow forecast?
Answer
Realistic assumptions, regular updates, scenario planning for best/worst cases.
💡 Hint
Realistic + updated + scenarios
Question
Why do forecasts help with loan applications?
Answer
Show the bank you've planned ahead and can predict repayment — reduces their risk.
💡 Hint
Shows planning ability
Question
Typical time period for a cash flow forecast?
Answer
12 months, broken down month by month.
💡 Hint
12 months, monthly
Question
Where does each month's opening balance come from?
Answer
Previous month's closing balance — carries forward automatically.
💡 Hint
Last month's closing
Question
Common forecast exam tasks?
Answer
Complete missing figures, amend for changes, interpret what results mean.
💡 Hint
Complete, amend, interpret
Read the notes
Full study notes for Cash flow forecasts
Topic 3.7 hub
Cash flow
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