Cash Flow

45-minute agenda

1. 0–5 min

   Warm-up

   Post: “You sell $500 of cookies to a school club that will pay you next month. You owe your supplier $300 today. Can you pay?”

   Teacher note: Not unless you have other cash — you've made a profitable sale but haven't collected the money yet.

2. 5–15 min

   Direct instruction

   Present the lesson slides. Make sure students leave with these points:

   • Profit ≠ cash.
   • Cash flow: operating, investing, financing.
   • Free cash flow = operating cash flow − spending on long-term assets.
   • Many businesses fail from running out of cash, not from losses.

   Use the “See it” slide (Why profit and cash arrive at different times) to make the idea visual.

3. 15–20 min

   Worked example

   Walk through “Profitable and broke” on the slides. Pause before the result and ask students to predict it.

4. 20–32 min

   Profitable and Broke

   Format: small groups · 12 minutes

   1. A business starts with $5,000 in cash. Every month it sells $5,000 of goods, pays $3,000 for them right away, and pays $1,000 of other expenses. Customers pay two months after each sale.
   2. Groups track profit and cash at the end of months 1, 2, and 3.
   3. Groups find the first month cash goes negative, even though every month is profitable.
   4. Discuss two ways the business could fix its cash problem.

   What to look for: Profit is $1,000 every month. Cash: month 1 $1,000; month 2 −$3,000; month 3 −$2,000 (the first $5,000 payment arrives). Cash goes negative in month 2. Fixes: collect sooner, pay suppliers later, or keep a cash cushion or credit line.

5. 32–37 min

   Check for understanding

   Use the question slides — or run them as a Four Corners game. Answers:

   1. Which is a likely explanation? — A. Customers are slow to pay, so sales are recorded before cash arrives.
   2. Buying a new delivery van would appear in which section of the cash flow statement? — C. Investing
   3. A fast-growing business is always safe from cash problems because its sales are rising. — False
6. 37–42 min

   Discussion

   • Have you ever had to pay for something before you got paid back? How did you handle it?
   • What could a small business do to avoid running out of cash while growing?
7. 42–45 min

   Exit ticket

   Prompt: Explain in one sentence how a profitable business can run out of cash.

   Answer: Profit is recorded when a sale happens, but if customers pay later while bills are due now, cash can run out.