1. Topics Covered Business Costs Revenue Profit Expenditure
Break Even Analysis
Budgeting
Cash Flow Forecast
Profit & Loss
Balance Sheet
Maximising Profits

2. Re-cap: Break-even
You have 20mins to look over your notes on break-even analysis.
= 20mins

3. Re-cap: Break-even
You have 30mins to complete a mock exam on break-even analysis.
= 30mins

4. LO1) To describe the purpose of a cash flow forecast
UNIT TITLE: Unit 2:Finance for Business
LESSON TITLE: Cash Flow Forecasting
LEARNING AIM: B
COMPETENCY FOCUS:
Key Skills (L5): you will be able to develop your numeracy skills to calculate financial transactions of a business and to interpret financial data.
Learning Objectives
By the end of the lesson, you should be able to…
LO1) To describe the purpose of a cash flow forecast
LO2) To explain the sources of cash inflows and cash outflows
LO3) To complete a cash flow forecast from given information
LO4) To analyse a business’ finances based on cash flow information

5. What is cash flow?
CASH FLOW – the movement of money into and out of a business bank account
INFLOWS refers to money received by the business
OUTFLOWS refers to money paid out by the business
EXAMPLES:
Sales revenue
Capital
Loans
Grants
EXAMPLES:
Purchases
Rent & Rates
Wages & Salaries
BUSINESS

6. Cash Flow
The difference between the inflows and the outflows is called the net cash flow. Positive net cash flow – Inflows are greater than out flows Negative net cash flow – Inflows are not enough to cover out flows Cash Balance – the amount of money in a business’ account at any particular time

7. Cash Inflows Money coming IN to the business
Cash can come in to the business in various ways:
- Sales
- Capital
- Loans
These can be regular (expected) and irregular

8. Cash Outflows Money going OUT of the business
Cash can flow out of the business in various ways:
- Purchases
- Wages
- Loan repayments
These can be regular (expected) and irregular

9. Cash Inflows/Outflows
For each of the following, say whether you think they are cash inflows or cash outflows.
Payment of taxes
Government Grants
Wages
Interest received on savings
Loan repayments
Buying new machinery
Loans
Sales Revenue
VAT payments
Rent received from premises owned

10. What is a ‘cash-flow forecast’?
It is a useful technique that a business can use to manage its money and to predict what their income and outgoings might be over the next 12 months.

11. Discuss in groups and write your answers on the sugar paper provided.
Cash-flow Forecast
Why do you think cash-flow forecasts are useful to managers in a business organisation?
Discuss in groups and write your answers on the sugar paper provided.

12. Building a Cash Flow Forecast
To build a cash-flow forecast you need to have the following information Opening Balance - the amount of money in the business’ bank account at the start of the period Income per Period – the amount of money expected to go into the bank account in that month Expenditure per Period – the amount of money expected to leave the bank account in that month Closing Balance – the amount expected to be in the bank account at the end of the period