Using the data in Extract E, explain one way Hardy Punglia could use his cash flow forecast - Edexcel - A-Level Business - Question 2 - 2019 - Paper 2
Question 2
Using the data in Extract E, explain one way Hardy Punglia could use his cash flow forecast.
Cash inflows for January are £2,000, increasing in February to £3,600 a... show full transcript
Worked Solution & Example Answer:Using the data in Extract E, explain one way Hardy Punglia could use his cash flow forecast - Edexcel - A-Level Business - Question 2 - 2019 - Paper 2
Step 1
Understanding cash flow forecasts
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Answer
A cash flow forecast helps predict expected cash inflows and outflows over a certain period. This analysis is essential for planning financial needs, ensuring that there is enough liquidity to cover operations.
Step 2
Evidence from the cash flow forecast
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Answer
Hardy Punglia predicts negative net cash flows in January (£5,000) and February (£400), indicating he will face financial difficulties. With closing balances decreasing from £3,000 to £1,600 from January to March, it emphasizes the need for careful liquidity management.
Step 3
One way to use the cash flow forecast
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Answer
The cash flow forecast can enable Hardy to arrange additional finance from his bank to cover operating costs. By demonstrating the forecast data, he can negotiate financial support to alleviate the initial cash shortfall.
