Business 0450 · IGCSE · Cash-flow forecasting and working capital
Cash-flow forecasting and working capital — practice question
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.
(a)[2]
Explain what is meant by ‘batch production’?
(b)[2]
Calculate the following June figures.
Net cash flow.
Closing balance.
(c)[4]
Identify and explain two benefits to QAC of holding a high level of inventory.
(d)[6]
Identify and explain two ways, apart from reducing inventory, that QAC could use to improve its cash flow position.
(e)[6]
Do you think QAC should alter its method of production? Justify your answer.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Products are produced in groups of a fixed size” …