Cashflow Forecasting and Liquidity (Risk Management Series) by Alastair Graham

By Alastair Graham

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Alternatively, a company can telephone its bank each morning to obtain information about funds that will be cleared that day. Assumptions For long-term forecasts, there will be much less accuracy, and assumptions about cash flows should be formulated carefully and stated clearly. A company could look to past records when estimating the length of float for cash forecasting. For example, the following assumptions might be appropriate: Receipts payment by credit card: lodgment/clearance delay one day checks and cash, presented to the bank over the counter each day: clearance delay about three days  < previous page < previous page page_61 page_62 next page > next page > Page 62 Payments direct debits, standing orders: actual dates can be identified checks: transmission and lodgment delay one day and clearance delay two days electronic funds transfers (cash management system), instructions by fax or by telephone to the bank: same day.

Dividends received: other group companies 11,600 17. Total cash inflows of interest and dividends 11,600 Cash outflows 18. Interest paid: external 19. Interest paid: other group companies 8,000 20. Dividends paid: external 21. Dividends paid: other group companies _ 5,400 22. Total cash outflows for interest and dividends 13,400 23. Net cash flow for interest and dividends (17-22) (1,800) TAXATION 24. Tax paid CAPITAL EXPENDITURE (CAPEX) AND FIXED ASSET SALES Â < previous page < previous page next page > next page > page_45 page_46 Page 46 Cash inflows 25.

For example, it would be possible to test the profit and loss account budget and the cash budget for an unforeseen 10% rise in material costs an unforeseen 5% drop in productivity a shortfall in sales volumes of 10% a labour strike of one month a delay of six months in opening a new plant or operation variations in foreign exchange rates or floating rate bank borrowings. Sensitivity analysis can be formalized over time by identifying key variables in the model, and changing the value of each variable, perhaps in progressive steps.

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