Business 0450 · IGCSE · Cash-flow forecasting and working capital
Cash-flow forecasting and working capital — practice question
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.
(a)[2]
What is meant by the term ‘specialisation’?
(b)[2]
Identify two ways, apart from profit, that Bowland could use to judge its success.
(c)[4]
Identify and explain two reasons why cash flow matters to Bowland.
(d)[6]
Identify and explain two ways in which Bowland could improve its cash flow.
(e)[6]
Bowland’s management believes that improved quality has been the leading cause of the rise in sales. Do you agree? 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: “Work is split up so that each worker focuses on a particular task and becomes expert” …