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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.
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
Step 2
Application: Evidence from Cash Flow Forecast
Answer
In the cash flow forecast for January, Hardy Punglia anticipates cash inflows of £2,000 against outflows of £7,000, resulting in a negative net cash flow of £5,000. This pattern continues, with a negative balance noted in February, where cash inflows are £3,600, while outflows are £4,300. The closing balance illustrates potential liquidity issues, particularly in January, where the balance falls to £3,000.
Step 3
Analysis: Implications of Cash Flow Forecast
Answer
The cash flow forecast can help Hardy Punglia arrange additional financial support from his bank if necessary, as it outlines forthcoming cash shortages. By proactively discussing his needs, he may secure funds to sustain his business operations and expansion plans, thus ensuring financial stability.