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.



Supporting Documents

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

Using the marketing mix in the fashion industry
Ben Sherman logo

Discover how Ben Sherman used finance theory to succeed in the fashion industry by downloading our premium case study.

Meeting customers' needs in growth markets - online gaming
BT logo

Find out how BT applied finance theory to succeed in the telecommunications industry by downloading our premium case study.

Innovation in infant nutrition
Cow & Gate logo

Find out how Cow & Gate applied finance theory to succeed in the food & drink industry by downloading our premium case study.

Leading a revolution in banking
Intelligent finance logo

Discover how Intelligent finance employed finance theory to thrive in the financial services industry by downloading our premium case study.

Using sponsorship to increase brand awareness
Infiniti logo

Find out how Infiniti applied finance theory to thrive in the automotive industry by downloading our premium case study.

Related Theory