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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]

LFK is a coal-mining business. It has 135 employees who are all provided with training. After the dismissal of one of LFK's employees there is a job vacancy for a new supervisor. External recruitment will be used. The Managing Director is preparing a cash flow forecast for LFK. An extract is shown in Table 3.1.

Table 3.1

Table 3.1

Question (a)

(a)

Calculate the value of X and Y.

X:

Y:

[ 2 ]

Question (b)

(b)

Identify four reasons why a cash flow forecast might be useful to a business.

Reason 1:

Reason 2:
Reason 3:
Reason 4:

[ 4 ]

Question 2

[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 3

[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 ]
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