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Business Studies IGCSEPDF 158
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Grants
Retained
profit
Debentures
Reinvested earnings
Long-term loans with fixed
interest
Government funds
No interest or
debt
Large sums
No repayment
Predicts future inflows and outflows to identify shortages.
Formula:
Net Cash Flow = Cash Inflows – Cash Outflows
Closing Balance = Opening Balance + Net Cash Flow
Importance:
● Helps avoid liquidity problems.
● Assists in planning for loans or investments.
Solutions to cash flow problems:
● Increase inflows (reduce credit period, sell unused assets).
● Decrease outflows (delay payments, cut costs).
Limited amount
Must repay with
interest
Rare and
conditional
● Cash: actual money available.
● Profit: total revenue – total cost.
A business can be profitable but still have cash problems if customers delay
payments.
5.2 Cash Flow
Cash vs Profit
Cash flow forecast