Why does a business plan increase the likelihood of obtaining finance from lenders and investors?

It demonstrates that the entrepreneur has thoroughly researched the market, understands the risks, and has a viable strategy for generating returns, thereby reducing perceived risk for potential financiers.

How do the financial projections in a business plan help banks assess a loan application?

They allow banks to evaluate whether the business can generate sufficient cash flow to repay the loan.

How do investors use the financial projections in a business plan?

They assess whether the business can generate sufficient returns on their investment.

Define a cash-flow forecast.

A financial document that predicts the expected cash inflows and cash outflows of a business over a future period, typically month by month.

Give four examples of cash inflows that would appear in a cash-flow forecast.

Revenue from cash sales, payments received from credit customers, loans received and capital injected by the owners.

State five examples of cash outflows in a cash-flow forecast.

Payments for raw materials, wages, rent, utilities, and loan repayments.

Edexcel A-Level Business 9BS0

Meeting Customer Needs

Topic overview The market Market research Market positioning

The Market

Topic overview Demand Supply Markets Price elasticity of demand Income elasticity of demand

Marketing Mix and Strategy

Topic overview Product/service design Branding and promotion Pricing strategies Distribution Marketing strategy

Managing People

Topic overview Approaches to staffing Recruitment, selection and training Organisational design Motivation in theory and practice Leadership

Entrepreneurs and Leaders

Topic overview Role of an entrepreneur Entrepreneurial motives and characteristics Business objectives Forms of business Business choices Moving from entrepreneur to leader

Raising Finance

Topic overview Internal finance External finance Liability Planning

Financial Planning

Topic overview Sales forecasting Sales, revenue and costs Break-even Budgets

Managing Finance

Topic overview Profit Liquidity Business failure

Resource Management

Topic overview Production, productivity and efficiency Capacity utilisation Stock control Quality management

External Influences

Topic overview Economic influences Legislation The competitive environment

Business Objectives and Strategy

Topic overview Corporate objectives Theories of corporate strategy SWOT analysis Impact of external influences

Business Growth

Topic overview Growth Mergers and takeovers Organic growth Reasons for staying small

Decision-Making Techniques

Topic overview Quantitative sales forecasting Investment appraisal Decision trees Critical Path Analysis

Influences on Business Decisions

Topic overview Corporate influences Corporate culture Shareholders versus stakeholders Business ethics

Assessing Competitiveness

Topic overview Interpretation of financial statements Ratio analysis Human resources

Managing Change

Topic overview Causes and effects of change Key factors in change Scenario planning

Globalisation

Topic overview Growing economies International trade and business growth Factors contributing to increased globalisation Protectionism Trading blocs

Global Markets and Business Expansion

Topic overview Conditions that prompt trade Assessment of a country as a market Assessment of a country as a production location Reasons for global mergers or joint ventures Global competitiveness

Global Marketing

Topic overview Marketing Niche markets Cultural/social factors

Global Industries and Companies

Topic overview The impact of MNCs Ethics Controlling MNCs

Raising Finance

Planning

7 things to know
Paper 2 and Paper 3

Overview

What a business plan contains and who reads it, and the cash inflows, outflows and closing balances that make up a cash-flow forecast.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Key term

What goes into a cash-flow forecast, and who reads it?

Numbers

Define each term in the closing balance formula.

Numbers

How is a closing balance calculated, and what delays it?

Process

How can managers use cash-flow forecasts for monitoring business performance?

Process

What key aspect of business performance does a cash-flow forecast fail to show?

Numbers

State the net-cash-flow formula.

Numbers

State the cash-flow closing-balance formula.

Questions from this subtopic

Each one with the model answer underneath.

1
Why does a business plan increase the likelihood of obtaining finance from lenders and investors?
Model answer
It demonstrates that the entrepreneur has thoroughly researched the market, understands the risks, and has a viable strategy for generating returns, thereby reducing perceived risk for potential financiers.
2
How do the financial projections in a business plan help banks assess a loan application?
Model answer
They allow banks to evaluate whether the business can generate sufficient cash flow to repay the loan.
3
How do investors use the financial projections in a business plan?
Model answer
They assess whether the business can generate sufficient returns on their investment.
4
Define a cash-flow forecast.
Model answer
A financial document that predicts the expected cash inflows and cash outflows of a business over a future period, typically month by month.
5
Give four examples of cash inflows that would appear in a cash-flow forecast.
Model answer
Revenue from cash sales, payments received from credit customers, loans received and capital injected by the owners.
6
State five examples of cash outflows in a cash-flow forecast.
Model answer
Payments for raw materials, wages, rent, utilities, and loan repayments.

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Meeting Customer Needs

The Market

Marketing Mix and Strategy

Managing People

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Net gain = − initial cost.

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AGross profit equals revenue minus cost of sales.

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Tariff means a tax imposed on imported goods.

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