Cash-flow forecasting and working capital

QAC makes 70 different cleaning products, including soap and polish, through batch production. To satisfy higher demand for two products, X and Y, QAC could spend $10m on flow production with new technology. The Finance Director is concerned about QAC’s cash flow position, as shown in Table 1. He believes it is important to keep inventory at a high level, but he also wants the cash flow position to improve.

Feb/March 2017

Identify and explain two benefits to BB from having an organisation chart.

Feb/March 2017

Gomez trades as a sole trader and offers painting and decorating services to business clients. Because the business is small, it gains no economies of scale. Gomez must pay suppliers within 1 month, but he allows customers 3 months to settle their bills. He uses an old van borrowed from his father to reach customers’ offices and shops. As the van often breaks down, Gomez is considering buying a replacement van. Table 2.1 shows a cash-flow forecast for the next 3 months.

Feb/March 2020

Explain two reasons that show why working capital matters for BW.

Feb/March 2020

SMR makes snack food by batch production. The snacks are marketed to people attending sporting events in city Y. To motivate its 3 part-time employees, SMR pays bonuses. The business has had customer complaints about the quality of the snacks. It predicts cash-flow difficulties in the next few months. Table 3.1 contains an extract from this cash-flow forecast.

Feb/March 2021

WFH manufactures hats and sells them to a mass market. It keeps inventory at a high level. The Managing Director is worried about the liquidity of the business and has been studying WFH’s financial statements. An extract is given in Table 2.1. The Managing Director believes the business could fail. Other stakeholder groups may also want to look at WFH’s financial statements.

Feb/March 2023

FR is a multinational business with hotels in 18 countries. It is looking to enter a new market and intends to open another hotel. FR’s Marketing Director is thinking about how the market could be divided into segments. FR’s Financial Director is deciding which source of finance should be used to pay for the expansion. He is also preparing a cash-flow forecast for the first year that the new hotel trades.

Feb/March 2024

TJK makes candles. Helping sustainable development matters to TJK. The business carries out batch production in its factory in country X. TJK’s products are aimed at females aged between 20 and 50 years. The Managing Director is examining TJK’s financial figures. An extract appears in Table 3.1. He is also weighing up the advantages to a business of turning into a multinational company.

Feb/March 2025

Explain two cash inflows and two cash outflows that are likely to appear in CR’s cash flow forecast for its first year of trading.

Feb/March 2025

Bowland assembles bicycles from components it buys from suppliers. The production process uses specialisation. The Finance manager commented: ‘The year has been successful because profit has risen. However, cash flow remains negative. Trade receivables (debtors) have grown and we have bought a large amount of new equipment.’ Bowland’s management thinks that better quality has been the main reason for the rise in bicycle sales.

May/June 2015

Alex and Raul are business partners. They set up a bicycle-repair business using their own savings because the bank would not agree to lend them any money. Raul carries out most of the repair work, while Alex is responsible for the accounts. Alex is astonished that the business has earned a small profit in its first year. ‘We could put this profit towards expansion. I do not understand why people say we would gain from having a business plan. A large share of the demand for our repair business comes from our friends who own bicycles.’

May/June 2016

The Government is widening public sector health care provision, including dentist clinics (see Appendix 1). Identify and explain two external benefits to the wider society arising from this extra provision of health care for poor families.

May/June 2016

C&P Designs is a partnership business run by Cory and Phoebe. They produce handmade jewellery. Phoebe works at home making all the jewellery, including necklaces and bracelets. C&P pay for materials when they are ordered, but they let customers take one month to settle payment. Cory looks after the accounts and the shop. He is concerned about cash flow, as Table 2 shows. Cory said: ‘The bank will not increase our overdraft. We should ask customers to pay more quickly.’ Phoebe believes advertising would raise sales, but she is worried about legal controls.

May/June 2017

JSF operates as a private-sector business. It employs 50 production workers who run machines. JSF produces a variety of household goods, such as towels and bed sheets. Most of its output is sold to retail businesses, which pay JSF after two months. The business is allowed two weeks’ credit to settle payments to its suppliers. The Finance manager has only just completed a cash flow forecast. He commented: ‘Cash outflows are too high. I have already cut the market research budget to zero. Training costs are $1000 per month and cannot be cut because training is important.’ The Finance manager is considering other methods of improving cash flow.

May/June 2018

Identify and explain two reasons why cash flow forecasting matters for Hilda. First reason: Why this matters: Second reason: Why this matters:

May/June 2018

BVC produces a variety of paints. It sells 60% of its output overseas. The Managing Director has been examining BVC’s cash-flow forecast in Table 2. He commented: ‘Success is not just about our return on capital employed.’ He is concerned about the arrival of new legal controls designed to protect the environment. As a result, BVC would need to use fewer chemicals in the production of paint. He believes these new legal controls would be bad for business.

May/June 2019

Hashim is an entrepreneur. He intends to begin as a sole trader by setting up a small gift shop beside a well-known tourist attraction. His market research suggests that sales are most likely to be highest from October to June. His first business collapsed within 6 months of start up because financial planning was poor. This time, Hashim has prepared a cash-flow forecast, shown in Table 1, as part of his business plan. His parents have agreed to provide an interest free loan to cover the shop rent. He hopes to secure trade credit from suppliers.

May/June 2019

NPX is an online retail business. Every order is dispatched straight to customers from its warehouse. NPX employs 60 full-time workers. The Operations Manager is studying NPX’s cash-flow forecast. An extract appears in Table 2.1. To raise productivity, the manager intends to bring in new technology that can pick and pack all the items for each order. This would make 35 workers redundant. The technology will cost $40 000. The manager is deciding whether to use internal sources or external sources to finance this technology.

May/June 2021

Explain four reasons why the level of inventory matters to TT.

May/June 2021

AHG is an established business because it has been trading for a long period. It offers garden goods, such as plants and flowers. AHG sets competitive pricing. The business employs 4 managers and 30 additional workers. Every one of AHG’s managers delegates. The Finance Manager is examining AHG’s statement of financial position because she wants to assess its liquidity. An extract appears in Table 1.1.

May/June 2022

TJM is a private limited company. It operates as a food retailer and owns 450 shops. During 2021, TJM’s revenue rose by $500 million. The Finance Director is examining TJM’s financial statements. An extract appears in Table 2.1. The directors intend to expand TJM by launching 20 new shops. TJM will need to complete a recruitment and selection process for 400 new employees.

May/June 2022

Explain two reasons why BB could experience cash-flow problems.

May/June 2022

LMA is a family-run restaurant. The business was launched 20 years ago and has stayed small. LMA operates as a partnership. The partners are weighing up whether LMA ought to convert into a private limited company. The Finance Manager is reviewing LMA’s cash-flow forecast. An extract is shown in Table 2.1.

May/June 2023

CPF is a clothing retailer. It is a private limited company. It operates 4 shops and employs 30 people. The Finance Director is worried about the level of current assets because working capital is important. Retained profit is also low. CPF’s directors are planning to grow the business by opening a new shop. A suitable long-term finance source will have to be chosen. The expansion plan will influence many of CPF’s stakeholder groups.

May/June 2023

TDG is a bicycle retailer with 3 employees. Because it sells in a mass market, it needs to keep customers loyal. Simon, the manager, understands that cash-flow management matters, so he is examining TDG’s cash-flow forecast. An extract is given in Table 1.1. Simon is thinking about how TDG can deal with its short-term cash-flow difficulty in September.

May/June 2023

Explain four reasons why it is important for Zane to prepare a cash-flow forecast before he starts ET.

May/June 2023

IDT is a multinational business that makes clothes for the mass market, and it has factories in 4 countries. Its finance needs are both short-term and long-term. The Finance Director is examining IDT’s statement of financial position, with an extract shown in Table 3.1. He has been asked to work out working capital and to describe how a rise in non-current liabilities could influence IDT.

May/June 2024

Explain one effect on PF of the rise in each of the two taxes shown in Appendix 2. Tax on people’s income. Tax on profit made by businesses.

May/June 2025

Identify and explain two leadership styles that would be suitable for Joey to apply with the production workers.

Oct/Nov 2015

NMBJ produces several kinds of cookies (biscuits) through batch production. In the previous year, profit rose by $1.5 million. The directors believe that this happened because productivity improved and working capital was managed more effectively. NMBJ keeps inventory at a low level. From March, NMBJ intends to raise the pay of all 300 employees by $50 per month. The Finance Director is concerned: ‘This choice will add $15 000 to wages each month. Many employees are leaving. Is increasing wages the best way to raise motivation?’

Oct/Nov 2017

ZumGo is a partnership run by two brothers, Richie and Justin. It offers bus tours for holidaymakers. After two profitable years, Justin wants the business to grow by purchasing another bus. The bus will cost $28 000. When Richie prepared ZumGo’s cash flow forecast as part of the business plan, he left out the $6000 for advertising in March. They cannot agree whether to lease the bus or use all of their retained profit to buy it. Leasing would cost $1000 per month for 2 years.

Oct/Nov 2017

Calculate the profit per day for AH using the information in Appendix 3.

Oct/Nov 2017

Bakin Group (BG) is a limited company. It runs 3 holiday parks that provide families with holiday accommodation and activities. BG wants to meet customers’ needs 24 hours a day. Customers pay for their holidays when they arrive at the park. Each park employs 3 managers and 40 part-time employees. BG advertises through a broad mix of social media networks. The Finance Director is worried about BG’s cash flow position. He is unsure whether an overdraft is the best way for BG to deal with its cash flow problem.

Oct/Nov 2018

KXD is a public limited company with 60 shops selling fashion clothing to 18-25 year olds. 60% of its inventory is imported. It has not made a profit for three years. The Managing Director stated: ‘Net cash flow is still positive, but KXD has been unable to match the rise in demand. We have also had difficulty because suppliers have not delivered the inventory we need on time.’ KXD intends to appoint the vacant Operations Director post immediately by using internal recruitment or external recruitment.

Oct/Nov 2018

Identify and explain two reasons showing why working capital matters to HH.

Oct/Nov 2018

PBG manufactures cars in country A. The Managing Director has been reviewing PBG’s financial statements. He is concerned about PBG’s liquidity position. Table 2 shows an extract from the balance sheet. The Managing Director stated: ‘New legal controls mean that all cars sold in country A will have to be electric by 2025. PBG must look for new markets for its existing cars while we develop new models.’ One possible move for PBG is to set up a joint venture with a car manufacturer in another country.

Oct/Nov 2019

Identify and explain two actions Neil and Jin could take to improve QC’s cash flow.

Oct/Nov 2019

Identify and explain one opportunity and one threat facing RR if a multinational company opens a restaurant close by.

Oct/Nov 2019

Veronique feels bored by her job in a large factory. Because she is creative, she wants to resign and open a flower shop. She has asked about micro-finance and drawn up a cash flow forecast; an extract appears in Table 3.1. Veronique has also done some market research and discovered that demand for flowers is likely to be high at festival times. She believes she has the right qualities to become a successful entrepreneur.

Oct/Nov 2020

Four years ago, Asmaa used a government grant to establish a small car repair business. She now employs 3 full-time workers. It matters to Asmaa that her employees remain highly motivated. She believes the business has gained from a low unemployment rate in the economy. Asmaa is checking her cash-flow forecast. A section is shown in Table 2.1. She wants to find out how the closure of a rival and a rise in the minimum wage rate could alter her forecast.

Oct/Nov 2021

Explain two methods that might resolve SSM’s cash-flow difficulties.

Oct/Nov 2021

Paolo is planning to launch a cake-making business. He intends to supply every product to a wholesaler. Paolo recognises that the packaging for his products will matter. He has put together some financial and sales information. An extract from this information appears in Table 1.1. Paolo is thinking about crowdfunding as a way to obtain finance. He also knows that the business will require working capital.

Oct/Nov 2023

OTK is a small jewellery shop located in the middle of Main City. At present, the business does not use ecommerce. OTK purchases its jewellery from local suppliers. Payment for the jewellery is made 30 days later. The shop manager is studying OTK’s cash flow forecast. She worries that the business could face a short-term cash flow issue.

Oct/Nov 2025

Explain two reasons why working capital is significant to LB.

Oct/Nov 2025