Cash-flow forecasting and working capital

Alex and Raul are business partners. They set up a bicycle repair business using their own savings because the bank would not provide a loan. Raul carries out most of the repair work, whereas Alex handles the accounts. Alex is surprised that the business has earned a small profit in the first year. ‘We can use this profit to expand. I do not see why people believe we would gain from having a business plan. A lot of the demand for our repair business comes from our friends who own bicycles.’

May/June 2016

The Government is enlarging public sector health care provision, including dental clinics (see Appendix 1).

May/June 2016

JSF operates in the private sector. It has 50 production workers who run machines. JSF manufactures a selection of household goods, including towels and bed sheets. Most of the output is sold to retail businesses, which pay JSF after two months. The business is allowed two weeks’ credit to pay its suppliers. The Finance manager has just completed a cash flow forecast. He said: ‘Cash outflows are too high. I have already cut the budget for market research to zero. Training costs are $1000 per month and cannot be reduced because training is important.’ The Finance manager is considering other ways to improve cash flow.

May/June 2018

Identify and explain two reasons why cash flow forecasting is significant for Hilda.

May/June 2018

BVC produces a variety of paints. It sells 60% of its output overseas. The Managing Director has been reviewing BVC’s cash-flow forecast in Table 2. He stated: ‘Success is not just about our return on capital employed.’ The Managing Director is concerned about the arrival of new legal controls to safeguard the environment. This would require BVC to cut down the number of chemicals used in paint production. He believes these new legal controls will harm the business.

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 choose and pack all the items for each order. As a result, 35 workers will become redundant. The technology will cost $40000. The manager is weighing up whether to finance this technology from internal sources or external sources.

May/June 2021

Explain two benefits to AAR of employing well-motivated employees.

May/June 2021

LMA is a restaurant owned by a family. The business began 20 years ago and has stayed small. LMA operates as a partnership. The partners are considering whether LMA ought to convert into a private limited company. The Finance Manager is examining LMA’s cash-flow forecast. An extract appears in Table 2.1.

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

LFK runs a coal-mining business. It employs 135 workers, and all of them receive training. After one of LFK’s employees has been dismissed, there is a vacancy for a new supervisor. External recruitment will be used. The Managing Director is drawing up a cash flow forecast for LFK. An extract is shown in Table 3.1.

May/June 2025

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

Oct/Nov 2017

Bakin Group (BG) is a limited company. It runs 3 holiday parks that provide family holiday accommodation and activities. BG wants to look after customers’ needs 24 hours a day. Customers pay when they arrive at the park for their holidays. Each park employs 3 managers and 40 part-time employees. BG uses a wide mix of social media networks for promotion. The Finance Director is concerned about BG’s cash flow position. He cannot decide whether an overdraft is the best option for BG to solve its cash flow problem.

Oct/Nov 2018

Identify and explain two ways Neil and Jin could raise QC’s cash flow.

Oct/Nov 2019

Veronique feels uninterested in her job in a large factory. Because she is a creative person, she wants to resign and open a flower shop. She has looked into 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 flower demand is expected to be high at festival times. She believes she has the qualities needed to become a successful entrepreneur.

Oct/Nov 2020

Explain two methods that could be used to overcome SSM’s cash-flow problems.

Oct/Nov 2021

Ayesha is planning to launch a business. After completing secondary market research, she has chosen to open a jewellery shop that sells watches and rings. Ayesha intends to use crowd-funding as her source of finance. She has drawn up a cash-flow forecast. An extract is shown in Table 2.1. Ayesha must decide whether buying a franchise is the best way to begin a business.

Oct/Nov 2022

Explain two reasons that show why KAT needs enough working capital.

Oct/Nov 2022

Paolo is planning to launch a cake-making business. He intends to sell all of his products to a wholesaler. Paolo knows that the packaging for his products will be important. He has drawn up some financial and sales information. An extract from this information is shown in Table 1.1. Paolo is thinking about crowdfunding as a source of finance. He also knows that the business will need working capital.

Oct/Nov 2023

OTK is a small jewellery store in the middle of Main City. It does not yet make use of ecommerce. OTK purchases its jewellery from local suppliers, and payment is made 30 days later. The shop manager is reviewing OTK’s cash flow forecast and is worried that the business could face a short-term cash flow issue.

Oct/Nov 2025

Explain two reasons why working capital is significant for LB.

Oct/Nov 2025