Cambridge International A Level · Business (9609)

Forecasting and managing cash flows: Practice Questions

4 multiple-choice questions marked as you go, and 2 written questions with worked solutions. All on Forecasting and managing cash flows.

6 questions18 marksFree, no account
Question 1
1 mark

What is the primary purpose of a cash flow forecast?

Question 2
1 mark

A business is experiencing a persistent cash deficit. Which action is most likely to improve its cash flow in the short term?

Question 3
1 mark

Which of the following strategies is most likely to improve a business's cash flow in the short term?

Question 4
1 mark

A firm is facing a liquidity crisis and needs to improve its cash flow immediately. Which of the following methods would be most effective in the short term?

Question 5
4 marks

Explain why a business prepares cash flow forecasts and briefly describe one method to improve cash flow.

Write your answer out first, then check it against the worked solution.

Question 6
10 marks

Alpha Innovations Ltd. is a new tech start-up. They have projected the following cash flows for their first three months of operation:


  • January: Opening cash balance $5,000. Cash receipts $12,000. Cash payments $18,000.
  • February: Cash receipts $15,000. Cash payments $16,000.
  • March: Cash receipts $10,000. Cash payments $8,000.

(a) Prepare a simple cash flow forecast for Alpha Innovations Ltd. for January, February, and March. Calculate the closing balance for each month. (6 marks)


(b) Based on your forecast, suggest and explain two methods Alpha Innovations Ltd. could use to improve its cash flow in the short term. (4 marks)

Write your answer out first, then check it against the worked solution.

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