Finance illustration Finance theory

Using a cash flow forecast

A forecast is an estimate of future figures based on experience. You can make forecasts about all sorts of events e.g. the weather, the likely result of a sports fixture, etc. In business, you can forecast future sales figures, or the likely cash flow into and out of a business. A business often prepares a cash flow forecast showing the money likely to flow into and out of its bank account in a given period.

Calculating cash flow

A retailing business typically makes sales of 500 items a month at £5 each. It buys each item that it resells for an average cost of £2.50 each. The running costs of the business are typically £1,000 per month. We can now calculate the cash flow of the business and set it out in a chart. The 'bottom line' of each monthly column shows the forecast bank balance at the end of that month.

Forecasts are based on past experience, whereas budgets are based on active plans for the future.



Related Theory

Supporting Documents

These downloads will help to put finance theory into context using real world examples from real businesses.

Using sports marketing to engage with consumers
Kia Motors logo

Discover how Kia Motors employed finance theory to thrive in the automotive industry by downloading our premium case study.

Creating the right marketing mix
Motorola logo

Learn how Motorola used finance theory to succeed in the telecommunications industry by downloading our premium case study.

Sponsorship as part of the marketing mix
Ford logo

Find out how Ford employed finance theory to prosper in the automotive industry by downloading our premium case study.

Re-focussing a company's culture and marketing mix
Argos logo

Find out how Argos employed finance theory to prosper in the retail industry by downloading our premium case study.

The marketing mix in the food industry
McCain Foods logo

Discover how McCain Foods used finance theory to prosper in the food & drink industry by downloading our premium case study.