IGCSE Business Studies: Chapter 5.2 Cash-flow forecasting and working capital

IGCSE Business Studies: 5.2 Cash-flow forecasting and working capital

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   • IGCSE Business exam strategies and technique  

Time stamps
00:00 - Intro
00:13 - Why cash is important to a business
01:16 - Inflows and outflows
02:00 - Cash is not profit
03:00 - Interpreting a cash-flow forecast
07:22 - Methods to overcome short-term cash flow problems
08:48 - Working capital
10:35 - Solved exam question

In this video, I guide you through Chapter 5.2 on cash flow forecasting and working capital. I emphasize the importance of cash, defining it as the most liquid asset, essential for business operations and loan support. Understanding cash flow forecasting is crucial; it involves tracking inflows and outflows, such as sales, debt payments, and expenses. I illustrate that cash is not the same as profit—cash is necessary for survival, akin to water for a fish. A cash flow forecast projects monthly cash movements, allowing businesses to anticipate future needs.
I explain methods to address short-term cash flow problems, including going cash-only to boost inflows and considering bank loans or overdrafts for quick cash. Additionally, I discuss working capital, defined as current assets minus current liabilities. Positive working capital is vital for day-to-day operations, while negative working capital poses risks.