The main instrument of the financial plan is the cash flow, usually prepared on a monthly basis and for the number of years that will allow a good understanding on whether the business will prosper or fail at the assumed level of prices and volume of sales. It provides a "panoramic" view of the future performance of the business. This information is of great interest to prospective equity investors or financiers as is the case with bankers, venture capitalists and also employees and suppliers.
The cash flow is a forecast of cash inflows, cash outflows and of the net cash position in each period.
The forecast of cash inflows encompasses:
(i) revenue from the sale of goods or services, based on marketing research or other market evidence;
(ii) provision of capital from the owners of the business;
(iii) credits and loans from banks;
(iv) interest from short or long term bank deposits;
(v) rents from property;
(vi) other inflow of cash as is the case with cash from the redemption of bonds and securities.
The forecast of cash outflows is represented by
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