Terry
0450-20-M-J-11-1e
Chan
TOPIC QUESTION - PAPER 1
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Chan
May 17, 2026 at 7:36:21 AM
May/June 2020
Version 1
5.0 Financial Information and Decisions
5.2 Cash-Flow Forecasting and Working Capital
YOUR ANSWER
Delaying payments to supplier will increase liquidity and working capital. This will make available more cash that can be used to hire new employees to increase output to meet increasing demand. However, Kara could also increase cash-inflow by reducing the number of days her suppliers need to pay up to less than 60 days. Therefore, delaying payments to suppliers may not be the best way for a small business to improve its cash-flow as it may increase its debts, reducing the chance of getting a loan from the bank.
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