Cash Flow and Liquidity
Cash inflows and outflows, net cash flow, opening and closing balances, forecasting and the distinction between cash and profit.
How to study for GCSE Business
Learn each concept as a cause-and-effect chain, practise calculations with units, apply evidence from the case and justify decisions against the business's objectives.
Core concepts
Concept 1
Cash flow records the timing of money entering and leaving a business; net cash flow equals inflows minus outflows.
Exam cue: Keep the period and signs consistent when calculating balances.
Concept 2
Closing balance equals opening balance plus net cash flow and becomes the next period's opening balance.
Exam cue: Use a forecast to identify the timing and size of a shortfall before recommending action.
Concept 3
A profitable business can face a cash shortage because sales, purchases, credit, inventory and capital spending occur at different times.
Exam cue: Explain whether an action changes the amount, timing or certainty of cash flows and any wider consequence.
Risk pitfalls and guardrails
Treating cash inflow as profit or cash outflow as cost in every case.
Guardrail: Do not stop at a generic advantage or disadvantage: use the case, check the calculation and keep board-specific paper claims separate from the common core.
Forgetting to carry a closing balance into the next period.
Guardrail: Do not stop at a generic advantage or disadvantage: use the case, check the calculation and keep board-specific paper claims separate from the common core.
Recommending more sales without considering whether customers pay immediately.
Guardrail: Do not stop at a generic advantage or disadvantage: use the case, check the calculation and keep board-specific paper claims separate from the common core.
Memory anchors
Cash inflow
Money received by the business during a period.
Cash outflow
Money paid by the business during a period.
Net cash flow
Cash inflows − cash outflows.
Closing balance
Opening balance + net cash flow.
Cash versus profit
Profit measures trading performance; cash flow measures the timing of receipts and payments.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
A business receives £36,000 cash and pays out £29,500 during April. What is net cash flow?
Opening cash is £4,200 and net cash flow is £1,700. What is closing cash?
Answer all questions to submit.
Next step personalized recommendations
Continue learning
Move forward only after this module is stable.
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