Finance, trade credit and enterprise records
Compare funding sources, explain trade credit, calculate basic cash flow and break-even figures, and use records for decisions.
Section Component 2 · Coursework
Exam scope and assessment notes
Cambridge IGCSE Enterprise 0454, examinations 2026–2029. This lesson maps syllabus topics 6.1, 6.2, 6.3, 6.4. These are original study examples, not Cambridge questions, pre-release case studies, coursework submissions or official marks. Use Cambridge's current pre-release material only as directed by your centre; prepared notes are not permitted in the written examination. Component 2 is assessed by the centre and externally moderated. Learners must plan and produce their own assessed project and evidence under centre rules; this site does not write, mark or certify coursework.
Before you begin
- Distinguish a stated fact from an estimate or assumption.
- Use the case details in the question before making a judgement.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
What does a cash-flow forecast track?
What you will learn
- Compare finance for start-up, continued trade and expansion
- Explain trade payables and receivables
- Calculate cash flow, break-even and simple profit or surplus
- Explain budgets and accurate financial records
Match finance to the need
Start-up finance can include owners' savings, family or friends, bank overdrafts and loans, leasing or mortgages, community sources, charities, grants, subsidies, crowdfunding and share sales. Continuing trade or expansion may use retained profit, private institutions, venture capital or issuing shares. Each source has conditions, cost, control and risk.
Trade credit lets an enterprise receive goods or services before paying a supplier (trade payable), or allow a customer to pay later (trade receivable). It can support cash timing but late payment can strain the supplier or leave the enterprise short of cash.
Use figures to make decisions
A cash-flow forecast records expected cash inflows and outflows over time; a surplus means inflows exceed outflows in a period and a deficit means they do not. Break-even output equals fixed costs divided by contribution per unit, where contribution is selling price less variable cost per unit.
An income statement summarises revenue and expenses to show profit or loss; a charity records a surplus or deficit rather than profit. A simple budget, cash-flow forecast and income statement help plan and review activity. Accurate records provide a true and fair view, support forecasting and decisions, and may be needed for legal or tax purposes.
Sources for this lesson
- Cambridge IGCSE Enterprise 0454 subject page
- Cambridge IGCSE Enterprise 0454 syllabus for 2024–2025 · Version 2
- Cambridge IGCSE Enterprise 0454 syllabus update for 2024–2025
- Cambridge IGCSE Enterprise 0454 syllabus for 2026 · Version 2
- Cambridge IGCSE Enterprise 0454 syllabus update for 2026
- Cambridge IGCSE Enterprise 0454 syllabus for 2027 · Version 2
- Cambridge IGCSE Enterprise 0454 syllabus update for 2027
- Cambridge IGCSE Enterprise 0454 syllabus for 2028 · Version 1
- Cambridge IGCSE Enterprise 0454 syllabus for 2029 · Version 1
Pause and explain
A charity receives $900 and spends $760 in a period. What is the result?
Worked example
A project sells a product for $8 each, with variable cost $3 each and fixed costs $300. Calculate contribution and break-even output, then explain one limit of the result.
Show the worked solution
- Contribution per unit is $8 − $3 = $5.
- Break-even output is $300 ÷ $5 = 60 units.
- The result assumes the stated costs and price remain valid and all units can be sold.
Answer Contribution is $5 per unit, so $300 of fixed costs require 60 units to break even. This is a planning estimate; changes in costs, price, demand or product mix can change the actual outcome.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A project begins with $100 cash. During the week it receives $600 and pays $450. Calculate net cash flow and closing cash.
Give me a hint
Subtract outflows from inflows, then add the net amount to opening cash.
Compare my reasoning
- Calculate net cash flow: $600 − $450.
- Add the net cash flow to opening cash of $100.
- State what the result says about this week's cash position and what it does not say about profit.
Net cash flow is $150. Closing cash is $100 + $150 = $250. This shows cash available at the end of the week, not profit, because the figures may omit other costs, unpaid amounts or non-cash items.
Look for these in your work
- Net flow calculated correctly
- Closing cash calculated correctly
- Cash distinguished from profit
An enterprise has sales revenue of $1,000 and expenses of $760. Calculate the result and explain how a not-for-profit organisation would describe a positive result.
Give me a hint
Subtract expenses from revenue, then use the correct term for the organisation.
Compare my reasoning
- Subtract $760 from $1,000.
- Identify whether the case is a profit-making business or a charity/not-for-profit.
- Use profit for a business or surplus for a charity, while checking the period and records.
The difference is $240. A profit-making business may report a $240 profit for the period; a charity or not-for-profit would describe a positive result as a $240 surplus. The label depends on the organisation's purpose and accounting context.
Look for these in your work
- Difference calculated correctly
- Terms used appropriately
- Context recognised
A new enterprise can use a bank loan or crowdfunding to buy equipment. Compare the options and recommend what information to gather.
Give me a hint
Compare cost, repayment or obligations, control and the amount raised.
Compare my reasoning
- Find the loan interest, repayment schedule, security and cash-flow effect.
- Check crowdfunding platform costs, delivery promises, target, timing and whether rewards or shares are offered.
- Compare each with the start-up's realistic cash forecast and funding amount before choosing.
A loan can provide a known amount but creates repayments and interest even if sales are weak. Crowdfunding may validate interest but can fail to reach its target or create delivery and communication obligations. The founder needs full costs, timing, conditions and a realistic forecast before recommending either.
Look for these in your work
- Both sources compared
- Risks and obligations included
- Recommendation depends on evidence
Common mistakes
- Confusing a loan with income or ignoring repayment cost
- Treating trade credit as free finance
- Adding cash receipts to profit without accounting for timing or costs
- Calling a charity's surplus profit
What can you explain now?
How is contribution per unit calculated?
Compare with the explanation
Selling price less variable cost per unit
Fixed cost divided by number of customers
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
How do cash flow, break-even output and profit answer different questions?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.