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Learning objective

Evaluate possible solutions to cash flow problems, including rescheduling payments, using overdrafts, reducing cash outflow, increasing cash inflow and finding new sources of finance.

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Topic

Cash flow

Subtopic

Solving cash flow problems

Aqa Gcse BusinessFinance

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Quick explanation

Evaluate possible solutions to cash flow problems, including rescheduling payments, using overdrafts, reducing cash outflow, increasing cash inflow and finding new sources of finance

  • This point belongs to Cash flow, especially Solving cash flow problems.
  • You need to be able to evaluate possible solutions to cash flow problems, including rescheduling payments, using overdrafts, reducing cash outflow, increasing cash inflow and finding new sources of finance.
  • The key ideas to know are cash inflow, overdraft, and rescheduling payments.
  • Use the linked flashcards and practice questions to check recall, then practise applying the idea in an exam-style answer.

Key concepts

cash inflowoverdraftrescheduling paymentscash outflowfinance

Why it matters

This objective helps connect Solving cash flow problems to exam-style questions, flashcards, and revision notes for Cash flow.

Quick student answer

A small online service business has a projected cash outflow of £12,000 next month but only £8,000 in cash inflow. Evaluate the most suitable solution(s) to address this shortfall.

Direct answer

The business should first reschedule payments with suppliers to extend payment terms, then use an overdraft to cover the remaining shortfall, and finally reduce non‑essential cash outflow such as discretionary marketing spend.

How it works

Rescheduling payments delays cash outflow, improving the cash position immediately. An overdraft provides a short‑term bridge but incurs interest, so it should be used only for the gap that cannot be covered by rescheduling. Reducing non‑essential outflow further improves cash flow and reduces future risk. This combination balances cost, risk and speed of relief.

Key terms

  • Cash flow: The movement of money into and out of a business, measured over a specific period, and used to assess liquidity and financial health.

Common trap

Assuming overdraft is always the best solution: Overdrafts carry high interest and may not be suitable for long‑term cash shortages; businesses should first explore cheaper or non‑credit options such as rescheduling payments or reducing outflow.

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