5.2. Cash-flow forecasting and working capital
A subsection of Business Studies, 0450, through 5. Financial information and decisions
Listing 10 of 23 questions
Bakin Group (BG) is a limited company. It has 3 holiday parks that offer families holiday accommodation and activities. BG aims to look after its customers’ needs 24 hours a day. Customers pay for the holidays when they arrive at the park. Each park has 3 managers and 40 part-time employees. BG uses a wide range of social media networks for promotion. The Finance Director is worried about BG’s cash flow position. He cannot decide if an overdraft is the best way for BG to solve its cash flow problem. Table 1: Cash flow forecast for period January - March 2019 ($000) March February January Cash in Cash out: Interest Wages and other costs Total cash outflow (30) (20) X Net cash flow (50) (30) (40) Opening balance Y (50) (30) Closing balance What is meant by ‘limited company’? Calculate the values of X and Y. X: Y: [ 1 13 Identify and explain two advantages to BG of having part-time employees. Advantage 1: Explanation: Advantage 2: Explanation: Identify and explain one advantage and one disadvantage to BG of using social media networks for promotion. Advantage: Explanation: Disadvantage: Explanation: 1 13 Do you think an overdraft is the best way for BG to solve its cash flow problem? Justify your answer. 1 13
0450_w18_qp_12
THEORY
2018
Paper 1, Variant 2
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Veronique is bored with her work in a large factory. As a creative person, she would like to leave and start up a flower shop. Veronique has asked about micro-finance and prepared a cash flow forecast. An extract is shown in Table 3.1. Veronique has also carried out some market research and found out that the demand for flowers is likely to be high during festivals. She thinks she has the right characteristics to be a successful entrepreneur. Table 3.1 Extract from the cash flow forecast for Veronique’s flower shop for the first 3 months ($) Month 3 Month 2 Month 1 Cash in Cash out (200) (1000) Net cash flow (1200) (1000) Opening balance (400) (1200) (1000) Closing balance Define ‘micro-finance’. Veronique now thinks that the cash inflow in month 3 will be $1500. Calculate the: New net cash flow in month 3: New closing balance in month 3: State four reasons why a business might have cash flow problems. Reason 1: Reason 2: Reason 3: Reason 4: 1 15 Explain one method of primary market research and one method of secondary market research Veronique could have used. Method of primary market research: Explanation: Method of secondary market research: : Explanation: Do you think being creative is the most important characteristic of being a successful entrepreneur? Justify your answer. [ 1 15
0450_w20_qp_12
THEORY
2020
Paper 1, Variant 2
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Asmaa used a government grant to set up a small car repair business 4 years ago. Asmaa now has 3 full-time employees. Keeping her employees well-motivated is important to Asmaa. She thinks her business has benefited from a low rate of unemployment in the economy. Asmaa is reviewing her cash-flow forecast. An extract is shown in Table 2.1. She wants to know how the closure of a competitor and an increase in the minimum wage rate might affect her forecast. Table 2.1 Extract of Asmaa’s cash-flow forecast ($000’s) March February January Cash inflow Cash outflow (10) Net cash flow Opening balance Closing balance Define ’unemployment’. Identify one cash inflow and one cash outflow a business might have. Cash inflow: Cash outflow: Outline one advantage and one disadvantage to Asmaa of using a government grant as a source of finance. Advantage: Disadvantage: 1 9 Explain how the following changes might affect Asmaa’s cash-flow forecast. Closure of a competitor: Increase in the minimum wage rate: Explain two non-financial methods a small tertiary sector business could use to keep its employees well-motivated. Justify which method should be chosen. [ 1 9
0450_w21_qp_13
THEORY
2021
Paper 1, Variant 3
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Questions Discovered
23