FINA 200 Lecture Notes - Lecture 3: Cash Flow Statement, Financial Statement, Cash Flow
15 Mar 2018
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Budget: a cash flow statement that is based on forecasted cash flows (income and expenses) for a future time period. Anticipating cash shortages: small shortages can usually be made up from your chequing account or an emergency fund, budgets provide warning of shortages so that you can prepare for them. Assessing the accuracy of the budget: compare predicted cash flows to actual cash flows and take any necessary steps to improve your cash flow. Forecasting error: the difference between expected amounts and actual amounts. (columns 2 and 3) Need to look at different expenses and their forecasting error to determine where to cut back. Forecast net cash flows over several months: use information for a typical month and adjust it for unusual expenses such as personal shopping (allow for unexpected expenses). Large changes in cash flow could be the result of changes in income and/or expenses.
