Business 0450 · IGCSE · Cash-flow forecasting and working capital
Cash-flow forecasting and working capital — practice question
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.
(a)[2]
What does the term cash flow forecast mean?
(b)[2]
Calculate the values for X and Y.
(c)[4]
Identify and explain two benefits to JSF of market research.
(d)[6]
Identify and explain two reasons that make training important to JSF.
(e)[6]
Explain two ways (apart from reducing training costs) that JSF could improve its cash flow position. Which way do you think JSF should use? 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: “Estimated inflows and outflows of cash over a period of time” …