Unit 3 - Assignment 8 – Cash Flow Forecasting
Assignment Objective
To be able to create a cash flow forecast
Scenario
Dial A Pizza is hoping to go to the bank soon to ask for initial funding for the business. In order to help them achieve the loan from the bank,
they would like you to help them to create a 12 month cash flow forecast.
Assignment Outcomes
P6 – prepare an annual cash flow forecast using monthly data
M3 – analyse the implications of regular and irregular cash inflows and outflows for a business organisation
D1 – evaluate the importance of cash flow and break even for the effective management of business finance
Task
Task 1
1. Using the data provided, produce a cash flow forecast. This must show the:
a) Cash inflows (capital, sales, loans)
b) Cash outflows (purchases, loan repayments, wages)
c) Cash balances (opening balance, closing balance, income per period, expenditure
per period)
Task 2
2. A new cash flow forecast has been produced for Dial A Pizza. There are a number of changes to
income and expenditure from the first one you produced. Write an analysis of the implications of
regular and irregular cash inflows and outflows and the timing of inflows and outflows for
Dial A Pizza
a) How has income changed?
b) What changes have there been to the expenses of the business?
c) What might some of the problems be for Dial A Pizza?
d) What solutions might there be (how can Dial A Pizza avoid getting into trouble)?
Task 3
3. Create a report which evaluates the importance of cash flow and break even for the effective
management of Dial a Pizza’s finances. It should contain the following:
a) A list of benefits and drawbacks (limitations) of both break-even analysis and cash flow
forecasts
b) A suggestion of possible steps that Dial A Pizza could take to control their cash flow month
by month and longer term
c) An explanation of the implications on break even and cash flow that arise from
increasing/decreasing prices
d) Detail of the implications of cost increases/decreases on break even and cash flow
Grading
Criteria
P6
Evidence
M3
Word document
D1
Report
Cash flow
forecast
18th July 2011