Estimation of Cash Flows

a. What types of conditions may result in a company becoming “cash poor”? What steps could a company take to offset these conditions?

b. Cash flow forecasts usually begin with a forecast of cash receipts from revenues and cash payments of expenses 1. Identify two or more factors that should be considered in making a revenue forecast.

2. Explain why cash generated from sales may not be the same as sales reported for the period.

3. Give an example of a regularly recurring cash inflow and an example of an infrequent or irregular cash inflow.

c. Explain briefly why a company may be maintaining a large cash reserve or may have borrowed money even though it has a positive cash flow from its operating activities.