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UNIT 5 Business Accounting M1, D1 $9.61
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UNIT 5 Business Accounting M1, D1

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In this assignment I analysed the cash flow problems a business might experience. Furthermore, I justified the actions a business might take when experiencing cash flow problems. This assignment fully meet the criteria imposed by the teacher and also by the assignment brief.

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  • February 25, 2016
  • 5
  • 2015/2016
  • Essay
  • Unknown
  • Distinction

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M1 & D1




Now I am going to analyse the cash flow forecast that I compiled for
Alan Hull’s business by evaluating any issues that can be identified
through this cash flow forecast, and commenting on important
aspects of the financial forecast before making any
recommendations for improvements. To begin this analysis, first of
all I am going to identify some of the key aspects of his cash flow
forecast before determining any issues that could be problematic for
the business in the future.



The main problem when a business might experience with a cash
flow forecast.


The biggest problem that a business faces when uses a cash flow
forecast is that it cannot anticipate the unexpected events that a
business may face. For example cash flow forecast cannot anticipate
the problems that a business can have with the equipment, vehicles
and machineries in the future.
A cash flow forecast cannot anticipate the changes that the
government can make during a year. (Changes in VAT rates, changes
in Laws, etc.). Any changes in Laws or VAT affect in some degrees a
company. For example if the VAT rate will be increased from 20% to
25%, Alan will have to spend a larger amount of money on the
purchases because he will have to pay more on the VAT. Also if the
VAT is increased, the price of the goods that Alan’s shop sell will
increase too, so the customers’ attitude and behavior on purchase
will be changed, so the sales will have to suffer the consequences.
Another event that cannot be anticipated by the cash flow forecast
is represented by the base interest rate which is changed every
month by the Bank of England. Many businesses have loans from
banks and if the interest rate increases will lead to extra costs for
the businesses which have loans based on interest rate.

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