Mini-Lesson
Financial information and decisions
This mini-lesson covers Cambridge Section 5 — Financial information and decisions : business finance (needs and sources), cash flow and working capital , and income statements & balance sheets with profitability and liquidity ratios .
sources of finance cash flow & profit ratios
raising money, tracking it and judging performance
Work through each screen, answer the questions as you go (some are wordy, some are calculations) and collect ⭐ stars. Press Start when you're ready.
5.1 Business finance
Business finance: needs & sources
Businesses need finance to start up , run day-to-day and expand .
Internal sources: retained profit, sale of assets, owner's savings.External sources: bank loan, overdraft, share issue, debentures, trade credit, grants.Short-term (overdraft, trade credit) vs long-term (loans, shares).
Choosing: depends on cost, purpose, amount needed, and whether the owner will give up control (shares) or take on repayable debt (loans).
Quick check
Internal or external source?
? A company funds new machinery from profit it kept from previous years. Which source of finance is this?
Retained profit (an internal source) ✅
A bank loan (external) ❌
A share issue (external) ❌
Trade credit (external) ❌
Calculate
Your turn — cost of a loan
1 A firm borrows $25,000 at 8% simple interest per year. Calculate one year's interest.
$
Check ✓
Hint: interest = loan × rate = 25,000 × 0.08.
5.2 Cash flow
Cash flow & working capital
Cash flow is money in and out over time. A profitable business can still fail if it runs out of cash.
net cash flow = cash inflows − cash outflowsclosing balance = opening balance + net cash flow
Working capital = current assets − current liabilities. It is the finance available for day-to-day running.
Calculate
Your turn — closing balance
2 A business opens the month with $4,000 . Inflows are $15,000 and outflows are $12,000 . Calculate the closing cash balance.
$
Check ✓
Hint: net cash flow = 15,000 − 12,000 = 3,000; closing = 4,000 + 3,000.
Calculate
Your turn — working capital
3 A firm has current assets of $18,000 and current liabilities of $11,000 . Calculate its working capital.
$
Check ✓
Hint: working capital = current assets − current liabilities = 18,000 − 11,000.
Sort it
Cash inflow, cash outflow, or a source of finance?
Tap an item, then the group it belongs to.
5.3 Income statement
Income statement & profit
An income statement shows profit over a period:
gross profit = revenue − cost of sales
profit (net profit) = gross profit − expenses (overheads)
Retained profit is what is left after profit is distributed (e.g. dividends) — it can be reinvested in the business.
Calculate
Your turn — gross profit
4 A shop has revenue of $70,000 and cost of sales of $42,000 . Calculate the gross profit.
$
Check ✓
Hint: gross profit = revenue − cost of sales = 70,000 − 42,000.
5.4 Ratios
Profitability & liquidity ratios
Cambridge uses these ratios to judge performance:
gross profit margin = (gross profit ÷ revenue) × 100
net profit margin = (net profit ÷ revenue) × 100
current ratio = current assets ÷ current liabilitiesa liquidity ratio — roughly 1.5–2 is often healthy
Match it
Match the ratio to its formula
Tap a statement on the left, then the correct term on the right.
Calculate
Your turn — net profit margin
5 A business has revenue of $150,000 and net profit of $18,000 . Calculate the net profit margin.
%
Check ✓
Hint: net profit margin = (net profit ÷ revenue) × 100 = (18,000 ÷ 150,000) × 100.
Quick check
Reading the current ratio
? A firm's current ratio is 0.7 (current assets $7,000, current liabilities $10,000). What does this suggest?
It may struggle to pay short-term debts (weak liquidity) ✅
It has far too much cash ❌
It is definitely bankrupt ❌
Liquidity does not matter ❌
Quick check
Profit vs cash
? A business reports a healthy net profit but cannot pay this month's suppliers. What is the most likely reason?
Cash is tied up in stock or customers who owe money ✅
Its net profit margin must be negative ❌
It has no customers ❌
Profit and cash are always the same thing ❌
Recap
The big ideas to know
Finance: internal (retained profit, savings) vs external (loans, shares, overdraft); short vs long term
Cash flow: net flow = inflows − outflows; working capital = current assets − current liabilities
Income statement: gross profit = revenue − cost of sales; net profit = gross profit − expenses
Ratios: gross & net profit margin = (profit ÷ revenue) × 100; current ratio = CA ÷ CL
Profit ≠ cash: a profitable firm can still run short of cash
You've covered Cambridge Section 5 — Financial information and decisions. Press Finish to see your score.
🏆
Mini-lesson complete!
⭐⭐⭐
You've worked through Financial information and decisions for Cambridge IGCSE Business Studies. 🎉
Your stars: 0 / 0
Next: test yourself in the Evaluate stage Confidence Quiz, then lock it in with Verify .
📣 Smashed it? Share your score
Challenge a mate to beat your stars, or show a parent how you got on.
📲 Challenge a mate
👪 Show your parents
Restart 🔄
→ Back to all subjects