Page 269 - Cambridge IGCSE Business Studies

20: Cash-flow forecasting and working capital

2 The following simplifi ed cash-fl ow forecast has been
produced by the Finance Manager of ABC for the next four
months of trading. He has not completed the forecast for
March and April.

Jan Feb Mar Apr
Cash inflows $000 $000 $000 $000

Credit sales 230 250 200 180
Total cash inflows 230 250 200 180
Cash outflows
Payments 160 350 230 160

Net cash flow 70 (100)
Opening balance 20 90
Closing balance 90 (10)

a Identify two reasons why businesses need cash. [2]

b What is meant by ‘net cash fl ow’? [2]
c Complete the cash-fl ow forecast for March and April. [4]

d Identify and explain two benefi ts to ABC of
managing working capital. [6] 267
e Recommend how ABC’s Finance Manager might
use his forecast to improve the company’s cash fl ow
over the coming months. Justify your answer. [6]

Total available marks 40