Syllabus: International Baccalaureate - Individuals and societies - Business management (Standard Level)
Module: Unit 3: Finance and Accounts
Lesson: 3.7 Cash Flow

Introduction

Unit 3.7 of the International Baccalaureate (IB) Business Management Standard Level syllabus focuses on cash flow, a foundational concept in financial management. As part of the Finance and Accounts unit, this topic introduces students to the importance of liquidity in business operations. Cash flow is not just an accounting function but a vital commercial awareness skill, equipping learners to understand how businesses manage day-to-day finances to remain solvent.

This unit aligns directly with the IB curriculum’s emphasis on decision-making in real-world contexts and provides a natural bridge to workplace readiness themes. It also supports Gatsby Benchmark 4 by linking curriculum content to real business operations.

Key Concepts

Students should develop a thorough understanding of the following syllabus elements from Unit 3.7:

• Cash Inflows and Outflows: Identifying sources of income and expenditure for a business.

• Cash Flow Forecasts: Preparing and interpreting forecasts to identify liquidity shortfalls or surpluses.

• Difference Between Cash and Profit: Understanding that profitable businesses can still fail without positive cash flow.

• Causes and Consequences of Cash Flow Problems: Including poor credit control, overtrading, and seasonal revenue fluctuations.

• Strategies to Improve Cash Flow: Such as reducing expenses, improving debt collection, and rescheduling payments.

This unit also reinforces critical quantitative skills, including constructing and analysing cash flow statements and applying decision-making frameworks based on forecasted data.

Real-World Relevance

Cash flow management is a major reason why businesses succeed or fail. Real-life case studies bring this concept to life:

• Wilko (UK): The collapse of high-street retailer Wilko in 2023 was widely attributed to a failure to manage cash flow effectively during inflationary pressure and post-pandemic instability. Despite large store assets and brand loyalty, liquidity issues led to administration.

• Netflix: In its growth stages, Netflix operated at a net loss but managed cash flow successfully by strategically managing subscription inflows and content spending. This distinction between profitability and liquidity is a key learning point.

Such examples demonstrate the strategic decision-making involved in managing working capital and reinforce commercial awareness across sectors.

How It’s Assessed

Within the IB assessment structure, cash flow appears primarily in Paper 2, particularly in Section B extended-response questions and short-answer data response tasks. Key assessment details include:

• Command Terms:

  • Calculate (e.g., forecast net cash flow)

  • Analyse (e.g., impact of delayed payments on liquidity)

  • Evaluate (e.g., appropriateness of using overdrafts to solve cash issues)

• Question Types:

  • Data-driven interpretation (e.g., interpreting cash flow statements)

  • Scenario analysis (e.g., business case studies facing liquidity crises)

  • Application of tools (e.g., recommended strategies based on forecasts)

To succeed, students must combine numerical precision with strategic thinking — a hallmark of IB assessment philosophy.

Enterprise Skills Integration

Cash flow forecasting is a real-world commercial skill with direct ties to workplace readiness:

• Decision-Making: Students must assess when and how to act based on financial forecasts.

• Problem-Solving: Analysing cash deficits and proposing viable solutions mirrors real business challenges.

• Financial Literacy: Understanding inflows, outflows, and liquidity aligns with core enterprise competencies in personal and business finance.

Using tools like Skills Hub Futures, educators can immerse students in simulated business scenarios, where they must maintain solvency while achieving growth goals. This strengthens both commercial confidence and exam performance.

Careers Links

Understanding cash flow supports Gatsby Benchmarks 4, 5 and 6:

• Benchmark 4 (Linking curriculum to careers): Students see how finance applies across industries—from retail to tech.

• Benchmark 5 (Employer encounters): Real company case studies such as Wilko offer insights into corporate finance management and failure.

• Benchmark 6 (Workplace experiences): Simulations mirror workplace decisions, helping students practise financial planning and risk management.

Relevant career pathways include:

• Business and Finance Roles (e.g., finance analyst, credit controller)

• Entrepreneurship (e.g., small business cash flow management)

• Nonprofit and Public Sector Finance

Skills are transferable across commercial, public, and social sectors, making this topic essential for all students, not just future accountants.

Teaching Notes

Teaching Tips:

• Use real-time forecasting exercises: Create hypothetical business scenarios where students must build a forecast and respond to disruptions (e.g., delayed payments, rising costs).

• Apply case-based learning: Wilko and Netflix are effective for comparison tasks—students can evaluate cash flow management across sectors.

• Reinforce the cash vs. profit distinction through role-play or simulation, showing how strong sales can mask liquidity crises.

Common Pitfalls:

• Confusing cash flow with profitability.

• Ignoring timing issues in forecasts.

• Over-reliance on textbook examples without real-world context.

Extension Activities:

• Invite a guest speaker from a local business to discuss managing cash in a small enterprise (Gatsby 5).

• Use tools like the Break-Even Calculator and Cash Flow Builder from the Skills Hub to support numeracy and decision-making.

• Link with maths or ICT departments for a cross-curricular project modelling business cash flow using spreadsheets.