IGCSEBusinessCambridge (CIE)Exam Questions5. Financial Information & Decisions5.2 Cash Flow Forecast

Syllabus Edition

First teaching 2025

First exams 2027

Cash Flow Forecast (Cambridge (CIE) IGCSE Business): Exam Questions

Exam code: 0450, 0986 & 0264, 0774

1 hour17 questions
Easy
Medium
Hard
12 marks

Define ‘opening balance’

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24 marks

Case Study

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 the below table. She said: ‘When I started my business, I did not understand why cash is important’.

Extract from Kemala’s income statement 2021 ($000)

Revenue

480

Gross profit

192

Profit for the year

72

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

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32 marks

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

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44 marks

State four reasons why a business might have cash flow problems.

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5
Sme Calculator2 marks

Case Study

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 : Extract from LMA’s cash-flow forecast 2023 ($000)

July

August

September

Cash inflow

420

300

330

Cash outflow

410

320

360

Net cash flow

X

(20)

(30)

Opening balance

60

70

50

Closing balance

70

50

Y

Calculate X and Y.

Show your working.

How did you do?

64 marks

Identify four examples of a cash inflow.

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72 marks

Define 'net cash flow'

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8
Sme Calculator2 marks

Case Study

Veronique is bored with her work in a large factory. As a creative person, she would like to leave and start up a flower shop. Veronique has asked about micro-finance and prepared a cash flow forecast. An extract is shown in the below table. Veronique has also carried out some market research and found out that the demand for flowers is likely to be high during festivals. She thinks she has the right characteristics to be a successful entrepreneur.

Extract from the cash flow forecast for Veronique’s flower shop for the first 3 months ($)

Month 1

Month 2

Month 3

Cash in

500

1 200

2 000

Cash out

1 500

1 400

1 200

Net cash flow

(1 000)

(200)

800

Opening balance

0

(1 000)

(1 200)

Closing balance

(1 000)

(1 200)

(400)

Veronique now thinks that the cash inflow in month 3 will be $1,500. Calculate the

  • New net cash flow in month 3

  • New closing balance in month 3

How did you do?

92 marks

Define 'insolvency'

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10a2 marks

Case Study

BikeFix is a mobile bicycle repair service in a large city. Demand is higher in spring and summer. The owner wants to buy an electric van to reach more customers at weekends. BikeFix currently advertises with leaflets and social media. The owner is considering dynamic pricing (higher prices at peak times). Two finance options are being considered: a bank loan or leasing the van.

Table 2.1 – Extract from BikeFix cash flow forecast (first quarter) $s

January

February

March

Opening balance

2 000

3 500

2 800

Cash inflows (sales)

6 000

5 400

7 200

Cash outflows (wages, fuel, parts, ads)

4 500

6 100

5 900

Net cash flow

1 500

X

1 300

Closing balance

3 500

2 800

Y

Define cash flow forecast.

How did you do?

10b
Sme Calculator4 marks

Calculate X and Y.

How did you do?

16 marks

Case Study

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 $40,000. The manager is considering using either internal sources or external sources to finance this technology.

Table 2.1: NPX’s cash-flow forecast for the period July – September 2021 ($000)

July

August

September

Cash inflows

100

120

140

Cash outflows

90

90

110

Net cash flow

10

30

30

Opening balance

5

15

45

Closing balance

15

45

75

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

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28 marks

Explain two ways SSM’s cash-flow problems could be overcome.

Refer to the following insert when answering the question.

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38 marks

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

Refer to the following insert when answering the question.

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46 marks

Case Study

Tech Flow Solutions is a software development company that creates mobile applications for small businesses. The company has 45 full-time employees working from a modern office building. TechFlow's Finance Director is reviewing the company's cash-flow forecast for the next quarter. An extract is shown in Table 2.1. The company has recently signed several large contracts that require significant upfront investment in new software licences and additional server capacity. These contracts will generate substantial revenue, but payments from clients are typically received 90 days after project completion. TechFlow is also planning to expand its workforce by hiring 20 new developers to meet increased demand.

Table 2.1: TechFlow's cash-flow forecast for the period October – December 2024 (£000)

October

November

December

Cash inflows

85

95

125

Cash outflows

110

130

140

Net cash flow

(25)

(35)

(15)

Opening balance

20

(5)

(40)

Closing balance

(5)

(40)

(55)

Explain two possible cash flow problems that TechFlow Solutions may face based on the forecast.

How did you do?

56 marks

Do you think cash flow forecasts always aid managers' decision-making? Justify your answer.

How did you do?

1
Sme Calculator12 marks

Consider how the following three changes in HHP's cash flow forecast might affect the business.

  • A 20% increase in monthly cash inflows

  • A 15% decrease in monthly cash outflows

  • A $1 million injection of capital in July

Which change would have the greatest impact on HHP's working capital? Justify your answer.

Refer to the following insert when answering the question

How did you do?

212 marks

Consider how the following three changes in HGL's cash flow forecast could affect the business.

  • Increase cash inflows by $100,000 per month

  • Reduce cash outflows by $75,000 per month

  • Arrange an overdraft facility of $200,000

Which change would have the greatest impact on HGL's working capital? Justify your answer.

Refer to the following insert when answering the question

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