38 exam-style questions on Cash flow — topic 3.7 of Finance and accounts in the IB Business Management syllabus — with answers and explanations. Samples below; the full set is free with an account.
A firm has current assets of 90000 and current liabilities of 60000. Calculate its working capital.
Answer: 30000
Working capital = current assets − current liabilities = 90000 − 60000 = 30000. The value 1.5 is the current ratio, not working capital.
In a cash flow forecast, opening cash balance is 12000, total cash inflows are 40000 and total cash outflows are 45000. Calculate the closing balance.
Answer: 7000
Net cash flow = 40000 − 45000 = −5000; closing balance = opening balance + net cash flow = 12000 + (−5000) = 7000.
Which of the following would improve a firm's cash flow position without reducing its total costs?
Answer: Longer credit terms from suppliers
Longer supplier credit delays cash outflows, improving the timing of cash flow, without changing the total amount of costs incurred. The others reduce costs rather than only altering timing.
A profitable business runs out of cash. Which situation best explains this?
Answer: Cash is tied up in unsold inventory and credit sales
Profit is recorded when a sale is made, but cash may not yet be received; overinvestment in inventory and generous credit to customers can leave a profitable firm short of actual cash (overtrading).
Which item would appear as a cash inflow in a cash flow forecast?
Answer: Receipts from cash sales
Cash inflows are amounts received by the business, such as cash sales receipts; purchases, rent, and loan repayments are cash outflows.
A seasonal toy retailer expects a large cash deficit in October before Christmas sales arrive. Which is the most appropriate short-term source of finance?
Answer: A bank overdraft
An overdraft is a flexible short-term source suited to bridging a temporary cash shortfall; long-term finance would be excessive and costly for a brief seasonal gap.
That was 6 of 38 Cash flow questions.
Practise all 38 freeDistinguishAO2 · 4–6 marks
Make the difference clear for BOTH terms — a definition of one of them is only half an answer.
StateAO1 · 2 marks
One word or one short sentence. No explanation, no working: the mark is for the fact itself.
38 Cash flow questions — free with an account. Spaced repetition, streaks and full exam simulations included.
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