Download App

Business Arithmetic — Entrepreneurship STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceEntrepreneurshipBusiness Arithmetic5 Marks
Question
Why there is a need for cash flow projection?
✓

Answer

The following are the need of cash flow projection:
  1. Every business must want to manage its affairs in a very efficient manner.
  2. It means it must pay its suppliers as per agreed terms, pay the employees their wages on stipulated dates, pay government levies, etc. as per rules, procure services and pay for the same, pay utility bills and rent etc., on time.
  3. It must collect what is due to it also in a timely manner and should strive to sell more so it can collect more.
  4. Very often, when business is expanding, your outflows can be more than in your inflows. This is so because there sidsts is always a lag between your spending (on raw materials, labour, etc.) and Tits your receiving the sales revenue.
  5. Receipt of sales revenue may be delayed because you might have given credit or you have produced ahead of the sales (to cater to the high demand during festive season) and are temporarily holding finished goods stock.
  6. In such situations, you should be equipped with sufficient information to be able to arrange for needed funds.
  7. The nature of any business is un certainty. You base your calculations on certain (hopefully realistic) assumptions.
  8. It plans the funds required using these assumptions.
  9. However, your actual performance, say of sales, could be higher or lower than your plan. It will rarely be exactly per plan.
  10. Or your collection from credit customers has lagged and you are running short of funds. There could be many other reasons as to why your well laid out funding plan has gone for a loss.
  11. To avoid such situations and be on top of things, reviewing your projections periodically and recasting the future Teams based on the current status (and not assumptions of the past, and what is likely to happen in the near future is very crucial.
  12. Cash flow projections is not a static document. It must be used as a dynamic tool.

Need a full question paper?

Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.

Start Generating Free

Explore more

More "5 Marks Question" from Business Arithmetic→Business Arithmetic — all question types→Entrepreneurship STD 12 Commerce question papers→CBSE Board STD 12 Commerce question papers→CBSE Board question paper generator→

Similar questions

The Apple iphone, a smartphone was launched by Apple in January 2007 in North America and when it went on sale it quickly sold out. It has launched the sixth generation phone, i.e. iphone in 2012. The latest is iphone 6+. Apple has been doing continuous research and development to attain this position, it has invested a lot into R&D. It prices its latest phone quite high. Which pricing strategy is being followed by Apple? Give reason.
→
Define budgetary control. State how "budgetary control” helps an entrepreneur?
→
Describe the characteristics of a company.
→
Parvesh has started a restaurant in a small town by the name of ‘Spices of India’ by spending ₹ 50,00,000. He invested ₹ 10,00,000 of his own and took a loan of ₹ 40,00,000 from State Bank of India @ 6% per annum. His monthly sales revenue is ₹ 20,00,000 and monthly cost of goods sold is ₹ 10,00,000. He pays a monthly salary of ₹ 2,00,000 to his employees. The GST rate is 18%.
Calculate (a) Return on Investment, and (b) Return on Equity.
→
Varshini started her high-end boutique in a posh locality, but she was not aware of how to make s her boutique popular in the area. Suggest some measures for it.
→
The fixed expenses of Wick and Wack' Limited is ₹ 2,75,000. The selling price of the toy 'Wick and Wack' is ₹ 50 and the variable cost is ₹ 30 per unit. Find the break-even quantity and sales at break-even level.
→
Explain any six ways adopted by entrepreneurs to generate ideas with at least one example for each.
→
“An enterprise that does not grow will eventually die.” Explain this statement with suitable examples.
→
Candy Sons produces Chocolates Cadbury Crunchie and Brunch Bar. Fixed costs are 25,80,00 per year. Sales revenue and variable costs per unit are as follows:
Sales Price per Unit 40 50
Variable Cost 16 10
  1. Suppose the company currently sells 70,000 Cadbury Crunchie per year and 30,000 Brunch Bar per year (Sales Mix Percentage 7:3 ). Assuming the sales mix stay: constant how many Cadbury Crunchie and Brunch Bar must the company sell to break even?
  2. Suppose the company currently sells 3,000 Cadbury Crunchie per year and 7,000 Brunch Bar per year (Sales mix percentage 3:7). Assuming the sales mix stay: constant, how many Cadbury Crunchie and Brunch Bar must the company sell to break even per year?
  3. Explain why the total number of chocolates needed to break even in (a) is the same as or different from the number in (b).
→
Jaishree started a readymade garments shop for ladies in a residential area where mostly government servants live. Suggest her the ways to make her business a successful one.
→