planning

Question 1

how relevant is a business plan when obtaining finance?

Answer 1

• it is needed to support applications for finance, as lenders/investors need a clear vision for future progress and profitability

Question 2

what does a business plan contain?

Answer 2

• a summary of the sales and marketing strategy, operations and finance
• business opportunity: description of the product or ranges to be made, how much will be sold and its price
• buying and protection: description of where the business will buy its supplies and the cost of production
• financial forecasts: sales forecast, loss forecast, cash flow forecast
• the business and its objectives
• size of the market and description of potential customers
• where finance will come from

Question 3

what is a cash flow forecast?

Answer 3

it lists all likely inflows and outflows over a future period of time, it is a prediction

Question 4

the use of cash flow forecasts: identifying cash shortages and surpluses

Answer 4

the closing balance and opening balance will help identify when an overdraft is needed

Question 5

the use of cash flow forecasts: supporting applications for finance

Answer 5

investors will use cash flow forecasts to decide whether or not they should invest depending on the likely failure/success of a business

Question 6

the use of cash flow forecasts: enhancing the planning process

Answer 6

planning helps improve performance and clarify aims, and it prevents mistakes and poor business performance

Question 7

the use of cash flow forecasts: monitoring cash flow

Answer 7

at the end of the year, the business will compare the predicted figures and the actual figures, which will help them plan better in the future and see where problems have arisen

Question 8

limitations of cash flow forecasts

Answer 8

• predictions : not accurate
• external factors not considered, like legislation changes, inflation or consumer tastes
• has to be regularly updated : time consuming