A Level Business: Forecasting and managing cash flows (Cambridge 9609) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover section 5.3 Forecasting and managing cash flows (5.3.1) of the Cambridge International AS & A Level Business 9609 syllabus for examination in 2026, 2027 and 2028, an AS Level topic that A Level candidates also study. All businesses are invented; money is in pounds. Revise with the study guide and the revision notes. Course links: the Cambridge A Level Business hub, the checklist and the free diagnostics.

Questions

1. Define the term “cash flow forecast”. [2]

2. Explain two purposes of a cash flow forecast for a business. [4]

3. A business has an opening balance of £2,300 in a month. It expects cash inflows of £9,400 and cash outflows of £10,150. Calculate the net cash flow, the closing balance and the opening balance for the next month. [3]

4. Vexford Catering has prepared part of its cash flow forecast.

£	March	April	May
Total inflows	14,000	16,500	12,800
Total outflows	15,200	(b)	17,300
Net cash flow	−1,200	900	−4,500
Opening balance	3,000	(a)	2,700
Closing balance	1,800	2,700	(c)

(a) Calculate the opening balance for April. [1] (b) Calculate the total outflows for April. [1] (c) Calculate the closing balance for May. [1] (d) Explain what the May figure means and suggest one action. [3]

5. A wholesaler sells goods for £30,000 in March on 60 days’ credit. In March it pays £22,000 for the materials and wages used to make them.

(a) Calculate the profit on this sale and the cash flow from this sale in March. [2] (b) Explain why a profitable business may still have cash flow problems. [3]

6. Strelley Cycles hires out bicycles. Its original forecast is below.

£	June	July	August
Total inflows	10,000	12,000	9,000
Total outflows	9,000	11,500	10,500

The opening balance in June is £5,000. In July a hotel group delays a £4,000 payment until August. In August the business also has an unexpected repair bill of £2,000.

(a) Calculate the closing balance for each month in the original forecast. [3] (b) Amend the forecast for the changes and calculate the new closing balance for each month. [3] (c) Analyse the effect of the changes on Strelley Cycles. [2]

7. A business sells £40,000 of goods on credit each month, and customers usually pay after 60 days. It offers a 2% discount to customers who pay within 10 days. Customers owing 25% of the value of its credit sales take up the offer.

(a) Calculate the cash the business receives early each month. [2] (b) Calculate the monthly cost of the discount. [1] (c) Analyse one limitation of using an early-payment discount to improve cash flow. [3]

8. Skelmanthorpe Tiles has unpaid invoices of £24,000. A debt factor offers to advance 85% of the invoice value now and to charge a fee of 2.5% of the invoice value. The factor passes on the rest when customers pay. Calculate the cash advanced, the fee, the balance paid later and the total cash the business receives. [4]

9. Mereworth Garden Centre expects to open January with £8,000. Its forecast net cash flows are shown below.

£	Jan	Feb	Mar	Apr	May
Net cash flow	−6,000	−7,500	−3,500	13,000	11,000

The owner is considering three options: a bank overdraft of up to £10,000 at 14% a year; a sale and leaseback of its delivery van, raising £12,000 with a lease cost of £4,000 a year; or asking suppliers for 30 more days of credit on the spring stock.

(a) Calculate the closing balance for each month. [3] (b) Evaluate the three options for Mereworth. [7]

10. Explain two reasons why the cash flow forecast of a new business may be unreliable. [4]

11. Hapsford Kitchen is a restaurant. Its forecast shows a closing balance of −£4,500 in two months’ time. It buys £6,000 of ingredients a month from suppliers on 30 days’ credit and holds £9,000 of ingredients in stock. Option A is to ask suppliers for 45 days’ credit. Option B is to cut stock to £6,000 by ordering more often from the same suppliers. Recommend, with justification, how Hapsford Kitchen should deal with the forecast deficit. [8]

Answers

1. An estimate of the cash a business expects to receive and pay out over future periods [1], showing the expected cash balance at the end of each period [1]. Examiner insight: Say what is forecast (cash in and out) and what it shows (balances). “A plan of money” is too vague.

2. Purpose 1: it shows when cash shortfalls are likely [1], so the business can arrange an overdraft or loan before it runs out of cash [1]. Purpose 2: it supports a request for finance [1], because a bank or investor can see that the business expects to meet repayments [1]. Examiner insight: Each purpose needs a development as well as a name.

3. Net cash flow = 9,400 − 10,150 = −£750 [1]. Closing balance = 2,300 + (−750) = £1,550 [1]. The opening balance for the next month is the same figure, £1,550 [1]. Examiner insight: Show the net cash flow first, with its sign.

4. (a) The April opening balance is the March closing balance: £1,800 [1]. (b) Closing 2,700 = opening 1,800 + inflows 16,500 − outflows, so outflows = 1,800 + 16,500 − 2,700 = £15,600 [1]. (c) 2,700 + (−4,500) = −£1,800 [1]. (d) It expects to be £1,800 overdrawn at the end of May [1], so it cannot pay all bills from its own cash [1]. One action: arrange a bank overdraft, or ask suppliers for longer credit, before May [1]. Examiner insight: For missing figures, use the link between opening balance, net cash flow and closing balance. In (d), say what the number means for the business.

5. (a) Profit on the sale = 30,000 − 22,000 = £8,000 [1]. Cash flow in March = −£22,000, since no customer has paid [1]. (b) Profit counts a sale when it is made, but cash arrives only when the customer pays [1]. Costs such as wages and materials are paid before customers pay [1]. If the business cannot pay suppliers or wages when they fall due, it can fail even though it is profitable [1]. Examiner insight: Use the figures from the stem to illustrate the point.

6. (a) June: 5,000 + 10,000 − 9,000 = £6,000 [1]. July: 6,000 + 12,000 − 11,500 = £6,500 [1]. August: 6,500 + 9,000 − 10,500 = £5,000 [1]. (b) July inflows become 12,000 − 4,000 = 8,000, so net cash flow is −3,500 and the closing balance is £2,500 [1]. August inflows become 9,000 + 4,000 = 13,000 and outflows 10,500 + 2,000 = 12,500 [1]; net cash flow is +500, so the closing balance is £3,000 [1]. June stays at £6,000. (c) Late payment cuts the July balance from £6,500 to £2,500 [1]. By August the repair bill leaves it £2,000 lower than forecast, so it may need short-term finance [1]. Examiner insight: Change only the lines affected and carry the new balance forward. Note that late payment moves cash between months, while the repair really reduces it.

7. (a) Customers taking the offer owe 25% of £40,000 = £10,000 [1]. The cash received is 10,000 × 0.98 = £9,800 early each month [1]. (b) The discount costs 10,000 × 0.02 = £200 a month [1]. (c) Customers may not take the discount, so the cash gain is smaller than planned [1]. Those who do pay less, so revenue falls by £200 a month [1]. A cash-short business with small margins may struggle to afford this [1]. Examiner insight: A limitation needs applying. “It costs money” alone is thin.

8. Advance = 0.85 × 24,000 = £20,400 [1]. Fee = 0.025 × 24,000 = £600 [1]. Balance paid later = 24,000 − 20,400 − 600 = £3,000 [1]. Total cash received = 20,400 + 3,000 = £23,400 [1]. Examiner insight: Check that the three amounts add to the invoice value (20,400 + 600 + 3,000 = 24,000).

9. (a) January: 8,000 − 6,000 = £2,000 [1]. February: 2,000 − 7,500 = −£5,500; March: −5,500 − 3,500 = −£9,000 [1]. April: −9,000 + 13,000 = £4,000; May: 4,000 + 11,000 = £15,000 [1]. (b) The deficit peaks at £9,000 in March and clears by April, so the gap is temporary and seasonal [1]. Overdraft: flexible and cheap; £9,000 for two months costs about 9,000 × 0.14 × 2/12 = £210 [1], though the bank can ask for repayment [1]. Sale and leaseback: £12,000 covers the gap, but the lease costs £4,000 a year for ever and the van is no longer owned [1], which is poor value for a gap that lasts a few months [1]. Supplier credit: costs nothing in interest and matches the stock bought in spring [1], but suppliers may refuse, and it may not close the whole £9,000 gap. Judgement: use the overdraft, helped by supplier credit if agreed, because the gap is temporary and leaseback costs are permanent [1]. Examiner insight: Evaluation needs a reasoned choice. Spotting that the deficit is seasonal, then judging each option against that, beats describing each in turn.

10. Reason 1: a new business has no trading history, so its sales estimates are guesses [1]; if sales are lower than forecast, inflows will fall short and cash will run out sooner [1]. Reason 2: owners can be over-optimistic or leave out costs they have not yet met [1], so outflows may be higher than forecast and the closing balances overstated [1]. Examiner insight: Link each reason to what goes wrong in the forecast. “It is only an estimate” fits every forecast.

11. Option A: 15 extra days on £6,000 a month defers about 6,000 × 15/30 = £3,000 of payments [1]. Option B: cutting stock from £9,000 to £6,000 releases £3,000 [1]. Each is a one-off effect, and neither alone covers a £4,500 deficit [1]. Risks of A: suppliers may refuse or charge more, harming the relationship [1]. Risks of B: running out of ingredients, so dishes cannot be served and sales are lost [1]. Together they release about £6,000, enough for the £4,500 gap [1]. Recommendation: do both if suppliers agree, with no borrowing needed [1]; start with B, which the restaurant controls, and use A for the remainder [1]. Examiner insight: Use the numbers to show whether one option solves the problem, and say which risk matters more in a restaurant.

Where marks are usually lost

• Using the month of sale, not the month of payment, for credit sales.
• Forgetting that this month’s closing balance is next month’s opening balance.
• Losing a minus sign on a negative balance or net cash flow.
• Writing “improves cash flow” without saying how the money moves.
• Not applying answers to the business in the stem.
• Recommending a long-term source for a short gap, or the reverse.
• Evaluating each option in turn without a final judgement.

Next steps

• Review the revision notes and the study guide.
• Visit the Cambridge A Level Business hub and the checklist.
• Try all the free 10-minute diagnostics.
• Book a free trial class.

Frequently asked questions

Which section of Cambridge AS and A Level Business 9609 do these questions cover? Section 5.3 Forecasting and managing cash flows (5.3.1). The questions are original and the businesses are invented.

What are the most common mistakes in cash flow forecasts? Recording credit sales in the month of sale rather than the month of payment, forgetting that this month’s closing balance is next month’s opening balance, and losing the minus sign on a negative figure.

How do you find a missing figure in a cash flow forecast? Use the links between the rows: net cash flow is inflows minus outflows, and closing balance is opening balance plus net cash flow. Rearrange these to find the missing value.

How do I evaluate options for solving a cash flow problem? Check whether the gap is temporary or long-term, use the numbers to show whether each option covers it, and avoid a long-term source for a short gap. Finish with a clear judgement.

Official syllabus

Cambridge International AS & A Level Business 9609 syllabus for examination in 2026, 2027 and 2028, published by Cambridge University Press & Assessment, section 5.3 Forecasting and managing cash flows.