Forecasting and Managing Cash Flows
What is the purpose of cash flow forecasting in business finance?
The purpose of cash flow forecasting in business finance is to estimate and predict the inflows and outflows of cash over a specific period. It helps businesses anticipate liquidity needs, plan for contingencies, and make informed financial decisions.
How can businesses interpret and analyze their cash flow forecasts?
Businesses can interpret and analyze their cash flow forecasts by comparing projected cash inflows and outflows, identifying periods of cash surplus or shortfall, assessing the timing and magnitude of cash flows, evaluating the impact of different scenarios or assumptions, monitoring working capital requirements, assessing the adequacy of cash reserves, and using the forecasts to support decision-making, budgeting, and financial planning.