7

5 Many enterprises have a cash flow deficit during the start up period. For
Examiner’s
(a) Explain why cash flow is important to an enterprise. Use

The cash flow is the inflow and outflow of cash in an

..........................................................................................................................................
enterprise. Cash flow is very important in an enterprise as
..........................................................................................................................................
it helps organisations to pay costs and expenses on time
..........................................................................................................................................

and make adequate investments. Having a poor cash flow

..........................................................................................................................................

can result a company on the risk of bankruptcy or paying

..........................................................................................................................................

payments late.
.................................................................................................................................... [3]

(b) Complete the cash flow budget below by calculating the amounts for A and B. The
figures in brackets are negative.

Mabel’s Lunches Cash Flow Budget

January February March April

US$ US$ US$ US$
Cash inflow (receipts)
Cash sales _____ 300
____ 450
____ 450
___
Total cash inflow (receipts) 0
_____ 300
____ 450
____ 450
___
Cash outflow (payments)
Vehicle (van) 2000
Fuel 100 100 100 100
Food 150 150 150 150
Packaging 35 35 35 35
Insurance 500
_____ ____ ____ ___
Total cash outflow (payments) 2785
_____ 285
____ 285
____ 285
___
Net Cash flow (2785) 15 A 165
Opening bank balance 2700
_____ (85)
____ (70)
____ 95
___
Closing bank balance (85)
_____ (70)
____ 95
____ B
___

165
Amount A ..........................................................................................................................

..........................................................................................................................................

260
Amount B ..........................................................................................................................

...................................................................................................................................... [2]

© UCLES 2011 0454/01/M/J/11 [Turn over

 8

(c) With reference to your enterprise project, explain the methods you used to try to avoid For
a cash flow deficit. Examiner’s
Our group used a lot of methods and management ways Use

..........................................................................................................................................
to make sure we have a good cash flow. We firstly made
..........................................................................................................................................
sure we had an expenditure list (which was managed by
..........................................................................................................................................
Irfan who is in charge of the finances), and an income
..........................................................................................................................................
statement to make sure we had a track of the cash inflow
..........................................................................................................................................
and outflow. We also tried to make sure we had suffic-
..........................................................................................................................................
ient cash through having a lot of shareholders, so that we
..........................................................................................................................................
could easily manage the cash flow. We also took some
..........................................................................................................................................
credit from suppliers that could allow us to pay later. As
..........................................................................................................................................

soon as we got our income, we payed them back later on

..........................................................................................................................................

time. We finally did marketing communications in order

..........................................................................................................................................

to attract customers and gain sufficient profits.

.................................................................................................................................... [6]

[Total: 11]

© UCLES 2011 0454/01/M/J/11