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Chapter 17 - Planning a Business
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What is the formula for net cash?
Net cash = total receipts − total payments.
What happens to closing cash at the end of the month?
It becomes the opening cash for the next month.
What figures does a cash flow forecast show?
Total receipts, total payments, net cash, opening cash, closing cash.
Give ONE reason why a cash flow forecast is important.
Identifies future cash problems / shows if bills can be paid / highlights opportunities.
What is liquidity?
The ability of a business to meet its short-term debts
What is working capital?
Money available for day-to-day use in the business.
Who are creditors?
People the business owes money to.
Who are debtors?
People who owe the business money.
Give ONE example of a payment.
Purchases / wages / expenses / money owed to creditors.
What are payments in a cash flow forecast?
All costs the business expects to pay out.
Give ONE example of a receipt.
Cash sales / money from debtors / grants / tax refunds
What are receipts in a cash flow forecast?
All income the business expects to receive.
What is a cash flow forecast?
A prediction of receipts and payments over a period of time.
What is cash flow?
All the money coming in and going out of a business.
When is a business plan especially needed?
When applying for a loan or finance from a bank.
What is a business plan?
A written plan drawn up by an organisation, required when seeking finance.
Give ONE example of what a mission statement explains.
What the business aims to do or why it exists.
What is a mission statement?
A short written statement of a business’s main goal.
What does SMART stand for?
Specific, Measurable, Achievable, Realistic, Time-bound.
Give ONE aim a business may plan for.
Become a market leader / sell globally / tackle a social cause / protect the environment.
Why must a business show evidence of planning to banks or grant providers?
To secure finance or government grants.
Why is good planning important for business success?
It makes the business more efficient and more likely to succeed.
Give ONE reason why a business prepares a business plan.
To increase efficiency / identify problems early / secure finance.
What is a plan?
A way of deciding in advance what you want to do and how you will do it.
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