P3
Provide a brief explanation of what information the forecast would provide to the Manager
The forecast would provide the manager with information of the predicted flow of cash in and
out a business over a given period of time, opening balance is the amount of cash available in a
business at the start of a set time period and the closing balance is the amount cash available at
the end of the set time period e.g. month. It also provides the net cash flow which is the total
cash inflows minus the total cash outflow which is important as the manager knows how much
they have left after the expenditure. Furthermore, the opening and closing balance of the
business, the opening balance is the amount of money left from the previous month or year that
is available to use for the present month or year, however the closing balance is the amount left
from the present month or year which is available to spend for the next month or year.
M1
Analyse the cash flow problems the business might experience.
In the first month of the cash flow forecast the cash outflow was not levelled with the cash
inflow, as the cash inflow was £19,000 and the cash outflow was £22,475. This may of
happened because of the cash purchases made in January which was £20,000, this huge cash
outflow was the cause of this, and made a loss for the company for four months of negative
opening and closing cash and two months of negative net cash flow. In addition to this, the
same situation happened again in July when the cash purchases made the total cash outflow
higher than the total cash inflow, however this time it was lower than the previous at £5,000.
This also made the net flow cash and the closing cash negative for only one month.
For the future he may experience cash flow problems again because he now needs to do some
promotion as his sales are lowering or he needs to raise higher amounts of profit to develop and
grow his business. With the result of this, promoting and advertising generally costs a lot of
money which may leave Ricky to get another loan from the bank as he does not have enough
money himself, if the promotion is successful then he will easily be able to pay off his loan and
continue running his business but with higher amounts of cash inflow. However, if the promotion
is not successful he will make a big loss as he will be in debt to the bank because he may not
be able to pay off the debt which may result in his business to close down.
D1
Explain what actions are available to a business when experiencing cashflow problems and
justify why the business might take these actions.
The actions that are available to a business when experiencing cashflow problems is to make
sure that they control the amount of cash outflow such as the cash purchases. The reason for
Provide a brief explanation of what information the forecast would provide to the Manager
The forecast would provide the manager with information of the predicted flow of cash in and
out a business over a given period of time, opening balance is the amount of cash available in a
business at the start of a set time period and the closing balance is the amount cash available at
the end of the set time period e.g. month. It also provides the net cash flow which is the total
cash inflows minus the total cash outflow which is important as the manager knows how much
they have left after the expenditure. Furthermore, the opening and closing balance of the
business, the opening balance is the amount of money left from the previous month or year that
is available to use for the present month or year, however the closing balance is the amount left
from the present month or year which is available to spend for the next month or year.
M1
Analyse the cash flow problems the business might experience.
In the first month of the cash flow forecast the cash outflow was not levelled with the cash
inflow, as the cash inflow was £19,000 and the cash outflow was £22,475. This may of
happened because of the cash purchases made in January which was £20,000, this huge cash
outflow was the cause of this, and made a loss for the company for four months of negative
opening and closing cash and two months of negative net cash flow. In addition to this, the
same situation happened again in July when the cash purchases made the total cash outflow
higher than the total cash inflow, however this time it was lower than the previous at £5,000.
This also made the net flow cash and the closing cash negative for only one month.
For the future he may experience cash flow problems again because he now needs to do some
promotion as his sales are lowering or he needs to raise higher amounts of profit to develop and
grow his business. With the result of this, promoting and advertising generally costs a lot of
money which may leave Ricky to get another loan from the bank as he does not have enough
money himself, if the promotion is successful then he will easily be able to pay off his loan and
continue running his business but with higher amounts of cash inflow. However, if the promotion
is not successful he will make a big loss as he will be in debt to the bank because he may not
be able to pay off the debt which may result in his business to close down.
D1
Explain what actions are available to a business when experiencing cashflow problems and
justify why the business might take these actions.
The actions that are available to a business when experiencing cashflow problems is to make
sure that they control the amount of cash outflow such as the cash purchases. The reason for
