1. Ruth is planning to start a hairdressing business in Sunderland
Ruth is planning to start a hairdressing business in Sunderland. She has been asked by her bank to provide a cash flow forecast. She has nearly finished it.
March
April
May
June
July
August
Cash at start
£12,000
£7,000
(£2,000)
(£5,000)
Cash in £0
£16,000
£20,000
Cash out
£5,000
£9,000
£15,000
£17,000
Net cash flow
-£9,000
-£3,000
£3,000
Cash at month end
-£2,000
-£5,000
£1,000
On the basis of the cash flow data, do you think Ruth should go ahead with her hairdressing business or not? Pick the 2 views that suggest her business is a bad idea
If No, it’s mainly because: 1.
She has turned £12,000 into £1,000 in 6 months 2.
If she cannot complete a cash flow forecast she shouldn’t run a business 3.
There are still huge cash outflows 6 months after the business start-up 4.
Trends are moving against the company by the end of the period 5.
It is very risky, as you cannot be sure of your cash inflows at the start 6.
There is no evidence that the business can ever be profitable 7.
She needs more start-up capital to avoid running an overdraft.

2. Ruth is planning to start a hairdressing business in Sunderland
Ruth is planning to start a hairdressing business in Sunderland. She has been asked by her bank to provide a cash flow forecast. She has nearly finished it.
March
April
May
June
July
August
Cash at start
£12,000
£7,000
(£2,000)
(£5,000)
Cash in £0
£16,000
£20,000
Cash out
£5,000
£9,000
£15,000
£17,000
Net cash flow
-£9,000
-£3,000
£3,000
Cash at month end
-£2,000
-£5,000
£1,000
On the basis of the cash flow data, do you think Ruth should go ahead with her hairdressing business or not? Pick the 2 views that suggest her business is a bad idea
If No, it’s mainly because: 1.
She has turned £12,000 into £1,000 in 6 months 2.
If she cannot complete a cash flow forecast she shouldn’t run a business 3.
There are still huge cash outflows 6 months after the business start-up 4.
Trends are moving against the company by the end of the period 5.
It is very risky, as you cannot be sure of your cash inflows at the start 6.
There is no evidence that the business can ever be profitable 7.
She needs more start-up capital to avoid running an overdraft.