Cash-flow forecasting and working capital: Practice Questions

Which of the following changes would directly result in an improvement of an enterprise's working capital position?

A bank manager is reviewing an enterprise's cash-flow forecast before deciding whether to grant a bank overdraft. Which specific piece of information in the forecast is the manager most likely to focus on?

Which of the following best describes the primary purpose of an entrepreneur preparing a cash-flow forecast before starting a new project?

An entrepreneur identifies a significant cash-flow deficit in their forecast for the next three months. Which of the following strategies would be the most effective short-term solution to improve the cash position?

If an enterprise decides to increase the trade credit period offered to its customers from 15 days to 60 days, how is this most likely to affect its cash-flow forecast in the short term?

A small bakery is considering extending trade credit terms to its local restaurant customers from 15 days to 45 days.

Explain one potential benefit and one potential risk this change might have on the bakery’s working capital.

State two reasons why maintaining a cash flow forecast is vital for an enterprise that experiences seasonal fluctuations in sales.

An electronics retailer faces a significant cash deficit in October because they must pay suppliers for holiday inventory before sales occur in December.

Evaluate whether using a bank overdraft or negotiating longer trade payables with suppliers is the more effective way to manage this specific cash flow problem.