Please enable JavaScript.
Coggle requires JavaScript to display documents.
Business Chapter 23: Cash flow forecasting and working capital - Coggle…
Business Chapter 23: Cash flow forecasting and working capital
why cash is important to a business
business may face problems
being unable to pay workers, supplier, landlord, government
production of goods and service will stop
workers will not work if they are not paid
the business may be forced into 'liquidation'
what is meant by cash flow
cash inflow
sale of products for cash
payments made by debtors
borrowing money from external source
sale of assets of the business
investors
putting more money into the business
cash outflow
purchasing goods or materials for cash
paying wages, salaries and other expenses
purchasing non-current assets
repaying loans
paying creditors of the business
cash flow cycle
cash needed to pay for
materials, wages, rent, etc
goods produced
goods sold
cash payment received for goods sold
how profitable business can run out of cash
allowing customers too long a credit period
purchasing too many non-current assets at once
expanding too quickly and keeping high inventory level
uses of cash flow forecasts
starting up a business
running an existing business
keeping the bank manager informed
managing cash flow
the importance of cash flow forecasts
starting up a business
keeping the bank manager informed
managing an existing business
managing cash flow
overcoming long-term cash flow problems
attracting new investors
cutting costs and increasing efficiency
developing new products that will attract more customers
concept and importance of working capital
working capital = current assets - current liabilities
working capital
cash is needed to pay day-to-day costs
for inventories
value of firm's debtors is related to volume of production and sales
value of inventories is also a significant part of working capital
overcoming short-term cash flow problems
increasing bank loans
delaying payments to suppliers
asking debtors to pay pay
delay or cancel purchase of equipment