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The Business Plan Workbook, 7th Edition by Robert Brown, Paul Barrow, Colin Barrow

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Assignment 18

Pro forma cash-flow statement

Cash flow versus profit

It is a generally accepted principle that the purpose of business is to make a profit. There is, however a purpose that is even more important – survival. In the short term, a business can survive even if it is not making a profit as long as it has sufficient cash reserves, but it cannot survive without cash even though it may be making a profit. The purpose of the cash-flow projection is to calculate how much cash a business is likely to need to accomplish its objectives, and when it will need it in the business. These projections will form the basis of negotiations with any potential provider of capital.

Let us look at the following example to illustrate the difference between ...

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