This set has eleven original questions, ordered from easier to harder, covering all five lessons in cash flow and finance. Questions 1 to 3 practise the forecast table, 4 and 5 profit versus cash, 6 to 8 sources of finance, 9 and 10 delayed receipts, and 11 a case-specific action.
All businesses here are fictional. Check the Cambridge pages for your exam year to see how Business 0264 or Business Studies 0450 words these topics, because the skills are the same but the wording differs.
Write each answer on paper, with units, then open the answer. Note which ones you missed and use the routing list at the end. The cash versus profit bridge can show a timing question on a timeline, the ratios tool can check a percentage, and the mistake log and retest queue helps you retry a fresh question later.
Questions
1. A food stall opens a month with RM1,500, receives RM6,200 and pays RM5,400. Find the net cash flow and the closing balance.
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Net cash flow: 6,200 − 5,400 = RM800. Closing balance: 1,500 + 800 = RM2,300. Check: 1,500 + 6,200 − 5,400 = 2,300.
2. Warung Nasi Lemak Bukit opens January with RM2,000. Receipts are RM7,000, RM6,500 and RM8,000 for January, February and March. Payments are RM6,800, RM7,900 and RM6,200. Complete the closing balance for each month.
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January: net 7,000 − 6,800 = +200, closing 2,000 + 200 = RM2,200.
February: net 6,500 − 7,900 = −1,400, opening 2,200, closing 2,200 − 1,400 = RM800.
March: net 8,000 − 6,200 = +1,800, opening 800, closing 800 + 1,800 = RM2,600.
3. A month’s closing balance is RM3,000. The opening balance was RM1,200 and payments were RM5,500. Find the cash received.
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Closing = opening + receipts − payments, so receipts = closing − opening + payments = 3,000 − 1,200 + 5,500 = RM7,300. Check: 1,200 + 7,300 − 5,500 = 3,000.
4. A graphic design firm in Johor Bahru invoices RM12,000 in a month. It pays RM8,500 in costs the same month, and the customer will pay next month. Find the profit and the net cash flow for the month, and the cash received next month.
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Profit: 12,000 − 8,500 = RM3,500. Net cash flow this month: 0 − 8,500 = −RM8,500. Next month the customer pays, so +RM12,000 arrives. Over the two months the cash gain is 12,000 − 8,500 = RM3,500, equal to the profit.
5. For each item, say whether it is a cash flow in the forecast and whether it changes profit: (a) buying a van for RM30,000 in cash, (b) depreciation of RM4,000, (c) a credit sale not yet paid, (d) receiving a bank loan.
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(a) Cash out of RM30,000 in the month paid. It is not charged to profit in full that month, only spread over the van’s life through depreciation. (b) Not a cash flow, because no money leaves. It does reduce profit. (c) Not a cash flow until the customer pays, but it is already counted in profit. (d) Cash in, but not revenue, so profit does not change.
6. Recommend a source of finance for each need and give a reason: (a) RM2,500 for two weeks to cover a gap before customers pay, (b) RM120,000 for a new factory expected to last ten years.
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(a) Overdraft, because the need is short and the firm pays interest only for the days it is used. (b) A long-term source such as a bank loan or money from owners, because the factory lasts ten years. An overdraft would be a poor match, since it is meant for short, changing needs.
7. A bakery borrows RM36,000 and repays RM1,150 a month for 36 months. Find the total repaid and the extra cost of borrowing.
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Total repaid: 1,150 × 36 = RM41,400. Extra cost: 41,400 − 36,000 = RM5,400. Check: 1,150 × 36 = 1,000 × 36 + 150 × 36 = 36,000 + 5,400.
8. The owner of a tailoring shop needs RM60,000. Option 1 is a bank loan. Option 2 is selling a 25% share of the business to an investor. Compare the two on control, and find the investor’s share if the shop makes RM40,000 profit in a year.
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Control: with the loan, the owner keeps full ownership but must repay with interest. With the share sale, there is no repayment, but the investor is a part-owner with a say in decisions. Profit share: 25% × 40,000 = 0.25 × 40,000 = RM10,000 a year goes to the investor. The right choice depends on whether the owner values control or repayment freedom more, and on whether the shop can afford loan repayments.
9. A firm opens a month with RM2,500, receives RM4,000 from regular customers and pays RM7,000. A customer owing RM9,000 should have paid this month but pays 30 days late. Find the closing balance now and if the customer had paid on time.
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Late: 2,500 + 4,000 − 7,000 = −RM500. On time: 2,500 + 4,000 + 9,000 − 7,000 = RM8,500. The firm is RM500 overdrawn because of the late payment, and the difference between the two cases is the RM9,000.
10. Using your answer to question 9, write a short explanation of the effect of the late payment on the firm.
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Because the customer paid 30 days late, RM9,000 did not arrive this month. The firm still had to pay RM7,000 of bills on time, so its balance fell to −RM500 instead of RM8,500. It may need an overdraft of at least RM500 or ask a supplier to wait. The money is delayed, not lost, so profit is unchanged and the cash returns next month.
11. Buku Ilmu, a bookshop in Melaka, forecasts a RM6,000 cash shortage in December because it must buy RM5,000 of stock before the school holiday rush. It already has an overdraft limit of RM4,000. A publisher offers 30 days’ credit on the stock. Recommend an action, show whether the gap is covered, and state a limitation.
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Action: accept the publisher’s 30 days’ credit on the RM5,000 stock. Case link: the shortage arises because the stock must be paid for before the holiday sales bring money in. Figures: the payment moves a month later, so the December gap falls from RM6,000 to 6,000 − 5,000 = RM1,000, within the RM4,000 overdraft. Limitation: the publisher may refuse credit or raise the price, and the bill falls due in January when the shop must have the cash. Judgement: accepting credit is suitable if the holiday sales bring in enough money before the bill is due.
If you got these wrong
- Questions 1 to 3: you may have started from zero or forgotten to add the opening balance. Return to constructing a simple cash forecast.
- Questions 4 and 5: you may have treated profit as cash, or counted a loan or depreciation incorrectly. Return to distinguishing profitable trading from a cash shortage.
- Questions 6 to 8: you may have matched a source to the need by name only, or ignored control. Return to comparing finance sources using duration and control.
- Questions 9 and 10: you may have said the money was lost, or skipped a step in the chain. Return to explaining a delayed receipt’s effect.
- Question 11: you may have given an action that could fit any business, or left out the limitation. Return to proposing a case-specific action with a limitation.
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