7115 · 5.2
Practice and worked examples for 7115 Cash-flow forecasting and working capital. Short previews only — attempt the full question in MarkScheme against the official scheme.
Opening balance January January: inflows $18 000, outflows $20 000. February: inflows $22 000, outflows $19 000.
Calculate net cash flow and closing balance for each month.
January Net cash flow = 18 000 − 20 000 = **− Closing balance = 5 000 + (−2 000) = **
February Opening balance = ** Net cash flow = 22 000 − 19 000 = **+ Closing balance = 3 000 + 3 000 = **
A firm forecasts negative closing balance of $4 000 in March. Suggest three actions to address this.
1. Arrange overdraft — short-term external finance to cover the gap (link 5.2.2).
2. Accelerate receivables — offer discount for early payment; chase overdue accounts (10.2.3 receivables days).
3. Delay non-essential outflows — postpone equipment purchase or negotiate longer trade credit with suppliers.
Also: reduce inventory purchases temporarily if overstocked.