5.2 Cash-Flow Forecasting and Working Capital

Nearly everyone will be aware of the importance of a business  making a profit and have a basic idea of how it’s calculated. However, cash-flow can be just as crucial for business success, as cash is the life blood of the business. Without enough cash the business will not survive.  So it is essential as business students that we get to grips with cash flow.

Cash-flow questions can be simple calculations to find the value of X and Y in a cash flow forecast or longer questions where students must look at the case study data and recommend ways of improving cash flow.

Jan Feb March April
Cash Inflow 50 120 150 220
Cash Outflow 280 270 170 140
Net Cash Flow (230) (150) Y 80
Opening Balance 0 (230) (80) (400)
Closing Balance X (380) (400) (320)

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