CIE IGCSE Topical Past Paper 1

5.2 Cash-flow forecasting and working capital

045/12/M/J/2024

IDT manufactures clothes for the mass market. It is a multinational company with factories in 4 countries. IDT has short-term and long-term financial needs. The Finance Director is analysing IDT’s statement of financial position. An extract is shown in Table 3.1. He has been asked to calculate working capital and to explain how an increase in non-current liabilities might affect IDT.

Extract from IDT’s statement of financial position ($ million)
	2022	2023
Current assets	380	420
Current liabilities	250	280
Non-current liabilities	300	400

Table 3.1

(b) Calculate IDT’s working capital in 2023. [2]

045/12/F/M/2024

FR is a multinational company. It has hotels in 18 countries. FR wants to expand into a new market and is planning to build another hotel. FR’s Marketing Director is considering how the market can be segmented. FR’s Financial Director is considering which source of finance to use to fund the expansion. He is also constructing a cash-flow forecast for the new hotel’s first year of trading.

(a) Identify one cash inflow and one cash outflow for a business. [2]
Cash inflow:
Cash outflow:

(e) Explain two ways a cash-flow forecast could be used by a business. Which is likely to be the most important way? Justify your answer. [6]

045/13/M/J/2023

TDG is a bicycle retailer. It has 3 employees. TDG needs to maintain customer loyalty as the business sells in a mass market. Simon, the manager, knows managing cash flow is important. He is analysing TDG’s cash-flow forecast. An extract is shown in Table 1.1. Simon is considering ways for TDG to overcome its short-term cash-flow problem in September.

Extract from TDG’s cash-flow forecast 2023 ($000)
	July	August	September
Cash inflow	X	50	40
Cash outflow	50	50	(Y)
Net cash flow	10	0	(40)
Opening balance	20	30	30
Closing balance	30	30	(10)

Table 2.1

(b) Calculate X and Y. [2]

(c) Outline two reasons why managing cash flow might be important for TDG. [4]
Reason 1:
Reason 2:

(d) Explain two ways TDG could overcome its short-term cash-flow problem in September. [6]
Way 1:
Explanation:

Way 2:
Explanation: