5.3. Forecasting and managing cash flows
A subsection of Business Studies, 9609, through 5. Finance and accounting (AS Level)
Listing 10 of 18 questions
Tin Mines (TM) TM is a private limited company in the primary sector. Tin is found underground and is extracted by mining. TM operates seven mines in country C. There are several job roles at each mine including skilled engineers, managers and miners. TM has recently discovered a new source of tin in a remote area of country C. TM has permission to develop a tin mine but will have to construct transport links. It will need new buildings such as offices, warehouses and employee housing. The Human Resources Director is developing a workforce plan to recruit miners and managers for the new mine. TM’s Financial Director has produced a cash flow forecast for the new mine for the next five years. This is shown in Table 2.1. Table 2.1: Cash flow forecast for the new mine ($m) Year Opening balance X –80 –95 –85 Sales Y Development costs Operating costs Closing balance –80 –95 –85 The remote area of country C where the new tin mine will be located has a high level of unemployment and average incomes are low. TM intends to recruit employees from the local area and buy resources from local suppliers, if they are available. The market for tin is likely to be affected by increased demand for electric vehicles. The batteries in electric vehicles contain tin. The government of country C believes that the tin mine will be of great benefit to both the local community and national economy. However, tin mining can result in pollution of local water supplies. Define the term ‘primary sector’ (line 1). Explain the term ‘market’ (line 19). Using the information in Table 2.1, calculate the value of the: opening balance (for 2022. sales (Y) for 2026. Explain one use of the cash flow forecast for TM. Analyse two methods of recruitment that TM’s Human Resources Director can use to recruit employees for the new mine. Evaluate possible conflicts between the aims of two of TM’s stakeholders.
9609_w21_qp_21
THEORY
2021
Paper 2, Variant 1
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Jake’s Cakes (JC) Jake started baking cakes while at university. He baked cakes for friends’ birthdays and other celebrations. He posted pictures of his cakes on social media sites where they received very positive feedback and were widely shared. In 2021 Jake started JC, a small business, using his parents’ kitchen. JC bakes cakes and sells them online. Jake created a website where customers design and order unique cakes. Jake uses digital promotion as the main method of promoting his products. JC has only used retained earnings to invest in marketing and new equipment. In 2023, Jake made a cake for a celebrity who shared JC’s social media posts with their social media followers. As a result of this an investor approached Jake. The investor offered to provide a $25 000 capital investment to help Jake grow the business. However, Jake does not want to take on an equal partner. Jake is considering a different plan for growth. His parents have agreed to let him convert their garage into his commercial kitchen. He has prepared a business plan and applied for a bank loan of $15 000 to finance this growth. He has produced a cash flow forecast for the first quarter of 2024. Table 1.1: JC’s cash flow forecast 2024 ($ 000) Jan Feb March Cash inflow Bank loan Cash sales 2.5 2.6 Total inflow 17.5 2.6 Cash outflow Fixed costs 1.5 1.5 Variable costs 0.5 0.6 0.8 Total outflow 20.5 2.1 2.3 Net cash flow (3) 0.5 Opening balance (1) Closing balance (1) (0.5) Identify one element of a business plan. Explain the term variable costs. Refer to Table 1.1. Calculate the forecast closing balance in March 2024. Explain one of Jake’s human needs that may be satisfied by operating JC. Analyse two benefits to JC of using digital promotion. Evaluate whether a bank loan is the most appropriate source of finance for JC’s growth.
9609_w23_qp_23
THEORY
2023
Paper 2, Variant 3
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Questions Discovered
18