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Chapter Summary 1. Business -> Cash flow forecast -> Purpose, Inflows/Outflows Household -> Budget -> Purpose, Inflows/Outflows 2. Sources of Finance Short , Medium, Long 3. Spreadsheets – definition & advantages 4. Qualifying for a Loan – Character, Capacity, Collateral and Credit Rating
1. Business -> Cash flow forecast -> Purpose, Inflows/Outflows
Household -> Budget -> Purpose, Inflows/Outflows
2. Sources of Finance
Short , Medium, Long
3. Spreadsheets – definition & advantages
4. Qualifying for a Loan – Character, Capacity, Collateral and Credit Rating
5. Choosing a Source of Finance – Cost, Purpose, Security, Tax Implications, Control
6. Bank Current Account Services – Cheque, Standing Order, DD, Paypath, ATM, Laser cards, Bank Statements
7. Similarities and differences between managing household and business finance.
(C) “Cash Flow is the lifeblood of any business and its management is critical to business
In September 2008, Buttercup Garden Centre prepared the following Cash Flow Forecast.
Cash Flow Forecast of Buttercup Garden Centre – October to December 2008
October November December Total
€ € €
Cash Sales 12,500 9,500 10,000 32,000
Credit Sales 2,000 1,500 3,500 7,000
Total Receipts 14,500 11,000 13,500 39,000
Cash Purchases 1,000 2,500 4,000 7,500
Credit Purchases 5,000 2,000 1,000 8,000
Wages 6,000 6,000 7,500 19,500
Equipment 12,000 - - 12,000
Total Payments 24,000 10,500 12,500 47,000
Net Cash (9,500) 500 1,000 (8,000)
Opening Cash 3,000 (6,500) (6,000) 3000
Closing Cash (6,500) (6,000) (5,000) (5,000)
(i) Explain the benefits to Buttercup Garden Centre of preparing a Cash Flow Forecast.
(ii) Based on the information provided above, outline how Buttercup Garden Centre could
improve the Cash Flow position of its business.
Ms. Marshall 6th year Business
(B) Balden Ltd prepared the following cash flow forecast:
2007 July August September Total
Receipts 70,000 55,000 80,000 205,000
Payments 80,000 45,000 55,000 180,000
Net Cash (10,000) 10,000 25,000 25,000
Opening Cash 3,000 (7,000) 3,000 3,000
Closing Cash (7,000) 3,000 28,000 28,000
(i) Why would this cash flow forecast be prepared by Balden Ltd?
(ii) How might management deal with the financial issue highlighted in this forecast?
The Business Cash Flow Forecast of Irish Garden Furniture Ltd. is set out below:
July August September Total
Ms. Marshall 6th year Business2002 Q5
Purpose of a Budget
Spreadsheets are used by both households and businesses to help plan their finances.
A spreadsheet is computer software that is used for basic accounting. It does maths calculations based on a formula you type in. it allows for a what if? Scenario to be calculated quickly and accurately, e.g. the impact a 10% increase in expenses would have on net profit.
4 C’s of Qualifying for a Loan
Financially viable? Income/profits – want to see P60/ Accounts
Control (Business only)
FIVE Factors to consider when choosing a source of finance
Tax deductible expense?
How can current accounts assist business and household financial management?
(a) Explain the term ‘short-term finance’.
(b) Illustrate a business situation where short term finance would be appropriate.
(i) Discuss the factors that should be considered when choosing between different sources of finance.
(ii) Analyse two appropriate sources of finance for acquiring a delivery van. (30 marks).
Identify a suitable source of finance for the purchase of a delivery van in a new business enterprise. Give two reasons for your choice. (10 marks)
2008 Q6 a
“Managing a business is similar to managing a household in the areas of finance and taxation”. Discuss this statement, using examples to support your answer. (20 marks).
Ms. Marshall 6th year BusinessRecent Exam questions
(a) Define short term finance
(b) Outline two short term finance options available for an established manufacturing business.
List four activities that are similar when managing a household and a business.
Discuss, using examples, the factors a manager should consider when selecting sources of finance for expansion (20 marks).
2003 SQ 10 marks
Distinguish between grants and subsidies.
+ ABQ 2003 Part a.
Ms. Marshall 6th year BusinessRecent exam questions