Unit 15 - confused with cash flow forecasts

Sparkly
Sparkly Registered Posts: 139 ? ? ?
Hi,

I'm trying to work through the question at the end of chapter 2 (preparing cash budgers) in my BPP book. There are two questiosns, numbers 4 and 5, which both give you data and ask you to prepare a cash flow forecast, the answers give two different formats. I'm trting to figure out how, if I didn't have the answers, I would know how to present the cash flow forecast.(I hope I'm making sense!)

The first question gives a lot of data about the company, forecast sales, production budget, raw materials required, the way purchase and sales are paid for. The anwers are then presented in columns for each of the 3 months, listing the cash receipts, cash payments, total payments, net cash flow, opening and closing balances.

The second question provide forecast p&l and balance sheets and asks you to prepare a cash flow forecast for the quarter. The answer is then presented showing:
Operating profit
Adjustments for non cash flows
Depreciation
Adjustments in working capital
Net cash flow from operating activities
Non-operating cash flows
Decrease in cash

Perhaps this is really obvious but i'm just not seeing it and feeling pretty confused!

How am I going to remember the layout, and which is the approriate one to use? and why are there the two different types?!

Comments

  • coojee
    coojee Registered Posts: 794
    Are you sure the second question isn't asking you for a cash flow "statement" rather than forecast? The answer you've shown looks like a cash flow statement.
  • Rinske
    Rinske Registered Posts: 2,453
    Cash flow statements can be used for a forecast too, so yes it sounds like it, I just don't remember if you needed to know the layout in unit 15.

    Sparkly, they are different ways, neither is right or wrong and in real world situations it would depend on the situation which one you would use to what would be more appropriate.

    I'm just not sure if you should know the layouts or that they will be given.
  • Sparkly
    Sparkly Registered Posts: 139 ? ? ?
    Thank you both for your responses. Having now looked at some of the practice simulations i'm more comfortable about what I should be doing when asked for a cash flow forecast. (and hooray, a proforma seems to be provided!)

    However, is someone able to help me understand properly the difference between a cash budget and a cash flow forecast?

    Many thanks
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