why is everything opposite on this cash flow forecast?

topcat
topcat Trusted RegularRegistered Posts: 452
Hello,

so confused as to why everything is opposite in this cash flow below (ignore my answers they are the opposite)

so sales receipts should be £96,000 + £5000 why when receivables are decreasing?:confused1:



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Comments

  • Nps
    Nps Experienced Mentor Registered Posts: 782
    If receivables decrease, it means you've received the cash, hence a cash inflow. Remember DA DA DD Going down your Statement of Financial Position Trade Recievables - if they DECREASE, you ADD it to your cashflow. Inventory - if they DECREASE you ADD it to your cashflow. Trade Payables - if they DECREASE you DEDUCT it from your cashflow (And vice versa). Whenever I do a cashflow question, I think of the phrase Ta-dah! (as used in the Boots No.7 advert). It reminds me of DA DA which reminds me of the order, and I know that the remaining one is the odd one out and therefore DD (deduct deduct). Very very random, but clearly works as I haven't done a cashflow question for months and months yet immediately knew what to do without having to work it out logically.
  • Nps
    Nps Experienced Mentor Registered Posts: 782
    Though if you do want to think of it logically - receivables have decreased, so you must have received the cash, therefore you have more cash, so a cash inflow. If inventory has decreased, you must have sold it, so another cash inflow. If trade payables decrease, then you must have paid them, therefore you have less cash, so a cash outflow.
  • Nps
    Nps Experienced Mentor Registered Posts: 782
    And clearly the site upgrade has not fixed my paragraphing problem - my explanation was much easier to follow when I typed it in paragraphs!
  • topcat
    topcat Trusted Regular Registered Posts: 452
    Nps wrote: »
    If receivables decrease, it means you've received the cash, hence a cash inflow. Remember DA DA DD Going down your Statement of Financial Position Trade Recievables - if they DECREASE, you ADD it to your cashflow. Inventory - if they DECREASE you ADD it to your cashflow. Trade Payables - if they DECREASE you DEDUCT it from your cashflow (And vice versa). Whenever I do a cashflow question, I think of the phrase Ta-dah! (as used in the Boots No.7 advert). It reminds me of DA DA which reminds me of the order, and I know that the remaining one is the odd one out and therefore DD (deduct deduct). Very very random, but clearly works as I haven't done a cashflow question for months and months yet immediately knew what to do without having to work it out logically.

    haha said this out loud sound like a right fool ! The madder the method of remembering the better it sinks in

    Thanks a lot :001_smile:
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