The following report analyses the cash flow forecast situation for Strobe Leisure plc.

Main findings section 2: An explanation of why a company such as Strobe needs a cash flow forecast?

Strobe leisure will be able to forecast and predict when they might face a liquidity problem. Strobe will list all the inflows and outflows of cash that appear in the budget.

Strobe will see whether an overdraft is needed or another short term finance is needed. The forecast will need to be monitored to monitor any unexpected cash flows. It is useful to know when a business is in trouble so Strobe can plan and there won’t be a sudden panic when there is trouble.

Main findings section 3: A six month cash flow forecast for Strobe

Main findings 4: An analysis of Strobe’s Cash flow forecast situation at present.

Strobe Leisure do have a healthy cash flow, a lot of profit is being made. At no point in the cash flow forecast they are overdrawn at any stage, this is because there is a healthy profit coming in every month. If Strobe did become overdrawn at any point due to low profits. They could either take a short term loan out, they could cut costs or take an overdraft.

Main findings section 5: Recommendation and conclusion

Overdraft

This is frequently used by businesses to provide finance for working capital. The overdraft is often used as a short term solution to cash flow problems.

Advantages

1. The business only pays interest  on an amount overdrawn each day.

28868836. Cheap way of borrowing.

Disadvantages

1. Must be paid back with interest.

Short term loan

These include starter loans which provide short-term finance for a new business.

Advantages

2. It’s quick to arrange

Disadvantages

3. Must be paid with interest, security is usually required.

Cut costs

Money can be saved by cutting down on material bought.

Advantages

4. Reduces storage cost of high  stock levels

Disadvantages

5. It must be done carefully to meet customers orders.

An overdraft should be taken as it’s the cheapest option, and interest only has to be paid on the amount of days taken. It’s quick to get and no security is needed.