Why is cash-flow estimation important while preparing a business plan?
Answer and explanation
Correct answer: To manage payments and expenses on time
Cash-flow estimation shows when money is expected to enter and leave the business. A venture may show accounting profit but still lack cash when wages, rent, suppliers, or loan instalments must be paid. Forecasting helps identify shortages, plan payment timing, and arrange funds responsibly. Logo design, names, and copying competitors do not serve this financial purpose.
Frequently asked questions
What is the correct answer to this question?
To manage payments and expenses on time
Why is this the correct answer?
Cash-flow estimation shows when money is expected to enter and leave the business. A venture may show accounting profit but still lack cash when wages, rent, suppliers, or loan instalments must be paid. Forecasting helps identify shortages, plan payment timing, and arrange funds responsibly. Logo design, names, and copying competitors do not serve this financial purpose.
Which subject and chapter does this question cover?
This is a Class 12 Business Studies question. Chapter: Financial Management. Topic: Financial planning.
