"To gain profit is important, but you must invest to build up assets that you can cash in in the future."
- Akio Morita (1921 - 1999), Co-founder of Sony Corporation

Cash flow refers to the movement of a business organization’s cash inflows (cash received from the sale of goods and/or services) and cash outflows (used to pay for the costs of running the business).

Cash flow forecasting and cash flow statements are often used to measure the financial health of a business. This is because the comparison of cash inflows and cash outflows enables managers to determine whether the organization is able to pay its costs in order to maintain its business operations.

The learning outcomes (or assessment objectives) for this section of the IB Business Management syllabus are:

• The difference between profit and cash flow (AO2)

• Working capital (AO2, AO4)

• Liquidity position (AO2)

• Cash flow forecasts (AO2, AO4)

• The relationship between investment, profit, and cash flow (AO2)

• Strategies for dealing with cash flow problems (AO3)

 Teacher only box

Note to teachers

Please note the following points about this section of the new syllabus:

• The Feb 2022 publication of the guide did not include working capital (AO2, AO4).

• The Feb 2022 publication of the guide did not include liquidity position (AO2).

• In the previous guide, the working capital cycle was taught to AO2, but the new guide requires this to be taught to AO2 and AO4.

• In the new guide, specific strategies for dealing with cash flow problems (AO3) are no longer stipulated (unlike in the previous guide).

Please be aware of the above points if/when using resources for the previous syllabus, such as past IB examination papers and mark schemes.