A forward-looking estimate of expected cash inflows and outflows.
For example, before the slow winter season, a roofing company builds a 6-month cash flow forecast showing projected income dropping to $15,000 per month while fixed expenses stay at $20,000, revealing a $30,000 shortfall that it will need a line of credit to bridge.
Why it matters: It acts as an early warning system, allowing management to anticipate cash shortages and secure funding before a crisis hits.
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