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Chapter 17 - Planning a Business

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