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IGCSE Business Studies5.2. Cash flow forecastTopic Practice

5.2. Cash flow forecast

CAIE IGCSE Business Studies 5.2. Cash flow forecast question practice helps you revise this syllabus point with the course map in view. Use this page to focus on one topic, check the style of questions available, and connect each attempt back to the knowledge area it is testing.

EduNinja keeps Business Studies practice aligned to CAIE, so you can move from topic review into exam-style question bank work without losing the syllabus structure. Start with a small set, mark the weak steps, then return to nearby topic links when a definition, graph, calculation, or explanation needs repair.

Question 1(e)

[Maximum number: 6]

Kara's business makes wax candles. She sells them to retailers at low prices. She gives retailers 60 days to pay. Kara has to pay her suppliers when raw materials are delivered. Kara used crowd-funding to set up her business. The bank would not give Kara a loan as she did not have a business plan. Last year revenue was $ 50000. Demand is increasing but Kara is not yet able to benefit from economies of scale. She said: 'Cash-flow is a problem. All cash inflows are used to buy inventory.'

Do you think delaying payments to suppliers is the best way for a small business to improve its cash-flow? Justify your answer.

Question 1

[Maximum number: 12]

TDG is a bicycle retailer. It has 3 employees. TDG needs to maintain customer loyalty as the business sells in a mass market. Simon, the manager, knows managing cash flow is important. He is analysing TDG's cash-flow forecast. An extract is shown in Table 1.1. Simon is considering ways for TDG to overcome its short-term cash-flow problem in September.

Table 1.1

Table 1.1

Question 1(b)

(a)

Calculate X and Y.

X:
Y:

[ 2 ]

Question 1(c)

(b)

Outline two reasons why managing cash flow might be important for TDG.

Reason 1:

Reason 2:

[ 4 ]

Question 1(d)

(c)

Explain two ways TDG could overcome its short-term cash-flow problem in September.

Way 1:
Explanation:
Way 2:
Explanation:

[ 6 ]

Question 2

[Maximum number: 8]

Gomez is a sole trader. He provides painting and decorating services to business customers. His business does not benefit from any economies of scale because it is small. Gomez has to pay his suppliers within 1 month. However, he gives customers 3 months to pay. Gomez uses an old van he has borrowed from his father to travel to his customers' offices and shops. As the van often breaks down, Gomez is thinking of buying a new van. A cash-flow forecast for the next 3 months is shown in Table 2.1.

Table 2.1

Table 2.1

Question 2(b)

(a)

Calculate X and Y.

X:

Y:

[ 2 ]

Question 2(e)

(b)

Do you think asking customers to pay more quickly is the best way for a small business to improve its cash-flow? Justify your answer.

[ 6 ]

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 2(a)

(a)

Define 'opening balance'.

[ 2 ]

Question 2(d)

(b)

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

Effect 1:
Explanation:
Effect 2:
Explanation:

[ 6 ]

Question 2(e)

[Maximum number: 6]

Nadia started her successful hairdressing business 4 years ago. Maintaining quality has always been important to Nadia. She said: 'I started with no experience of business plans, recruitment, cash flow or profit. I did not understand how economic issues such as inflation could affect a business. Now I have 5 hairdressing shops and 20 employees. Last year I made a profit of $ 100000.' Nadia is planning to expand her business. One way she could do this is by selling franchises.

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

Question 2

[Maximum number: 8]

Asmaa used a government grant to set up a small car repair business 4 years ago. Asmaa now has 3 full-time employees. Keeping her employees well-motivated is important to Asmaa. She thinks her business has benefited from a low rate of unemployment in the economy. Asmaa is reviewing her cash-flow forecast. An extract is shown in Table 2.1. She wants to know how the closure of a competitor and an increase in the minimum wage rate might affect her forecast.

Table 2.1

Table 2.1

Question 2(b)

(a)

Identify one cash inflow and one cash outflow a business might have.

Cash inflow:

Cash outflow:

[ 2 ]

Question 2(d)

(b)

Explain how the following changes might affect Asmaa's cash-flow forecast.

Closure of a competitor:
Increase in the minimum wage rate:

[ 6 ]

Question 2(c)

[Maximum number: 4]

Kemala makes high-quality beauty products. Demand for her best-selling hand cream is price inelastic. She advertises her products in specialist beauty magazines. Kemala is analysing her income statement. An extract is shown in Table 2.1. She said: 'When I started my business, I did not understand why cash is important'.

Table 2.1

Table 2.1

Outline two reasons why cash is important for Kemala's business.

Reason 1:
Reason 2:

Question 2

[Maximum number: 8]

LMA is a family-owned restaurant. The business was started 20 years ago and has remained small. LMA is a partnership. The partners are considering whether LMA should become a private limited company. The Finance Manager is analysing LMA's cash-flow forecast. An extract is shown in Table 2.1.

Table 2.1

Table 2.1

Question 2(a)

(a)

Identify two reasons why a business might have cash-flow problems.

Reason 1:

Reason 2:

[ 2 ]

Question 2(b)

(b)

Calculate X and Y.

X:

Y:

[ 2 ]

Question 2(c)

(c)

Identify four examples of a cash inflow.

Example 1:

Example 2:

Example 3:

Example 4:

[ 4 ]

Question 3(a)

[Maximum number: 8]

Explain two reasons why the cash-flow forecast in Appendix 3 is important to TT.

Reason 1:
Explanation:

Reason 2:
Explanation:

Question 3(a)

[Maximum number: 8]

Explain four reasons why it is important that Zane prepares a cash-flow forecast before starting ET.

Reason 1:
Reason 2:
Reason 3:
Reason 4:

0 selected