Question

Discuss how a company perdict cash flow of investment will increase in future before the company accept the negative investment.

(400words)

Answer 1

Cash flow plays a major role in business. It determines the inflow and outflow of cash.It helps in estimating the amount that is required for the efficient functioning of a business organization.It also helps in projecting the income and expenses of a business unit. it can be used for short term and medium term calculation.

Cash flow forecasts are mainly used to help the business units to plan how much cash they will be needing for a period of time.
Forecasting can compare the units expectations to the actual income and expenses.

Forecasting also specifies the growth and decline of areas of business.

Cash flow forecasts helps in framing the budget for purchase of equipments or any requirement of loan or insurance.
In case of hiring employees, a cashflow forecast can help in determining the average salary that can be provided the newly hired. it can also determine the surplus and shortage of inventories or capital.

Negative cashflow is when, your business unit has more outflow than inflow. It might be because of buying of equipments, or investments in various fields,etc.
Cash flow forecasting is indispensable.

It is mainly used to avoid negative cashflow.
In case of negative cash flow, the source of the problem should be identified and evaluated to bring in solutions with various alternatives.