Part of The Student Room Group

  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Why Businesses Use Cash Flows

Extracts from this document...

Introduction

The Usefulness of Cash Flow Forecasts Cash flow forecasts are important to businesses because it allows them to foresee how much capital they should have in a bank at any particular time of the year. They can achieve this by adding to an inventory all their expected cash inflows and to that adding up its cash outflows. The variation between the two is called the cash outflow and this is the amount the business expects to pay to other companies or individuals. ...read more.

Middle

Implications of Regular and Irregular Cash Flows In business the inflow and outflow of money is not always consistent. On some days a business can receive huge payments while on others they may find themselves having to pay-out large sums to businesses. All businesses much prefer a steady stream of payments because it allows them to easily plan and predict the future cash flow of the business. The implications of a regular cash inflow for BigC Productions is that they will have a consistent level of income every month which means they can pay their bills and plan for future purchases successfully. ...read more.

Conclusion

The irregular outflow means that they would spend a huge amount in the month of April which severally lowers their closing bank balance meaning that they are struggling to pay their bills for the following months until they receive a large payment in August. The regular outflow that they have means that they are better able to plan for each month's payments. Although they could also get in contact with the local council and ask that they spread out their Rates payment to a monthly fee instead of once per year which will allow them to pay it off in a more even level. ?? ?? ?? ?? ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Accounting & Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

or


Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Accounting & Finance essays

  1. annual cash flow forecast

    This would be a big outflow because there would be more money going out than coming in. This could lead us in to debits or short of cash. Cash flows contriburtes to our finances because it helps us to see if we had a positive month because this could be

  2. Management Accounting Report.

    x difference I price 158,000kg x 0.05 =7,900 favourable Usage Standard price x difference in usage �1.25 x 8000kg = 10,000 adverse Labour Rate Actual hours x the difference in rate 156,000 hours x 0.15p = 23,400 adverse Efficiency Standard rate x difference in efficiency �5.10 x 6,000 hours =

  1. Preparation of a cash flow forecast

    Cost of sales �0.00 �1,750.00 �2,000.00 �2,250.00 �2,500.00 �2,750.00 Rent �1,500.00 �1,500.00 �1,500.00 �1,500.00 �1,500.00 �1,500.00 Insurance �50.00 �50.00 �50.00 �50.00 �50.00 �50.00 Electricity �50.00 �50.00 �50.00 �50.00 �50.00 �50.00 Total outflows �2,600.00 �4,350.00 �4,600.00 �4,850.00 �5,100.00 �5,350.00 Net cashflow �900.00 -�350.00 -�100.00 �150.00 -�2,600.00 �650.00 Opening balance �5,000.00 �5,900.00

  2. Complete Report on Askari Commercial Bank

    Its present focus is on managing the 'Askari Master Card'' brands, accepted worldwide also in 4000 locations in Pakistan. 2005 was a significant year for the CCD, as it registered a three-fold profit increase over the preceding year, despite tough competition and decreasing margins.

  1. Business Plan for Internet Caf

    Other Assets: The total other assets cost of the project is $85000. The value of contributed other assets is $5000. The purchase cost of additional other assets required is $80000. Total Assets Purchased: The total cost of assets purchased for the project is $158000.

  2. Business and finance

    The loan will be at a fixed rate of interest with the repayments spread over affordable monthly instalments. You can choose a loan amount and repayment period that suits your circumstances. Select loan. A select loan is especially for select current account customers.

  1. Sales forecast limitations.

    Far better to look at best case and worst-case scenarios. Spreadsheet allow for easy manipulation of data. It is easy to see the impact of single and multiple changes to the forecast figures. This should help to reduce the risks.

  2. Responsible accounting is the ability to conduct business in a way that is not ...

    Annual reports have different meaning to each individual, therefore how you read an annual report depends upon your purpose. For example a person who invest will probably be interested in the profitability, survivability, growth, stability, dividends (if any), learn of problems, risks and other factors which may affect your investment in that company.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work