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CAIE IGCSE Business Studies 5.2 Cash Flow Forecast Questions

Use this cash-flow page to calculate forecast figures, explain inflows and outflows and justify methods for improving cash flow.

Syllabus
2027–2029
Course
Business 0264

Exam points

  • Calculate missing cash-flow values such as net cash flow or closing balance.
  • Explain why cash matters for paying suppliers, wages and day-to-day expenses.
  • Justify cash-flow improvement methods such as faster customer payment or delaying suppliers.

Covered syllabus points

5.2.1—The importance of cash and cash flow forecasts

Question 1

[Maximum number: 6]

ACP manufactures computers. Being ethical is important to ACP. The business employs 3000 workers in its factory. ACP imports 65% of its raw materials. As internal users of accounts, the directors plan to analyse ACP's financial performance using profitability ratios. The Finance Director thinks making a profit is more important for a business than managing its cash flow.

Do you think making a profit is more important for a business than managing its cash flow? Justify your answer.

Question 2

[Maximum number: 8]

NPX is an online retail business. All orders are sent directly to customers from its warehouse. NPX employs 60 full-time workers. The Operations Manager is analysing NPX's cash-flow forecast. An extract is shown in Table 2.1. To improve productivity, the manager plans to introduce new technology that can select and pack all the items for each order. This will make 35 workers redundant. The technology will cost $ 40000. The manager is considering using either internal sources or external sources to finance this technology.

Table 2.1

Table 2.1

Question (a)

(a)

Define 'opening balance'.

[ 2 ]

Question (b)

(b)

Explain two possible effects on NPX's cash-flow forecast of introducing the new technology.

Effect 1:
Explanation:
Effect 2:
Explanation:

[ 6 ]

Question 3

[Maximum number: 8]

SMR produces snack food using batch production. The snacks are sold to people watching sporting events in city Y. SMR pays bonuses to motivate its 3 part-time employees. SMR has received complaints from customers about the quality of the snacks. The business has forecast cash-flow problems in the coming months. An extract from this cash-flow forecast is found in Table 3.1.

Extract from SMR's cash-flow forecast ($)

Table 3.1

Table 3.1

Question (a)

(a)

Calculate the values of X and Y.

X:

Y:

[ 2 ]

Question (b)

(b)

Explain two ways SMR could overcome its cash-flow problems.

Way 1:
Explanation:
Way 2 :
Explanation:

[ 6 ]
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