Business 7115 · O Level · Cash-flow forecasting and working capital
Cash-flow forecasting and working capital — practice question
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.
(a)[2]
What does the term cash flow forecast mean?
(b)[2]
Calculate X and Y.
(c)[4]
Identify and explain two benefits that market research could bring to JSF.
(d)[6]
Identify and explain two reasons why training matters to JSF.
(e)[6]
Explain two ways, apart from lower training costs, that JSF could improve its cash flow position. Which way do you think JSF should choose? 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: “An estimate of the cash inflows and outflows of a business, usually arranged month by month” …