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1 Identify two reasons why a business might have cash-flow problems.

Reason 1: .................................................................................................................................................

..................................................................................................................................................................

Reason 2: .................................................................................................................................................

.................................................................................................................................................................. [2]

[Total: 2]

2 TDG is a bicycle retailer. It has 3 employees. TDG needs to maintain customer loyalty as the business sells
in a mass market. Simon, the manager, knows managing cash flow is important. He is analysing TDG’s
cash-flow forecast. An extract is shown in the table below. Simon is considering ways for TDG to overcome
its short-term cash-flow problem in September.

Calculate X and Y.

X: .............................................................................................................................................................

Y: ............................................................................................................................................................. [2]

[Total: 2]
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3 TJM is a private limited company. It is a food retailer and has 450 shops. In 2021 TJM’s revenue increased
by $500 million. The Finance Director is analysing TJM’s financial statements. An extract is shown in table
below. The directors are planning to expand TJM by opening 20 new shops. TJM will have to carry out a
recruitment and selection process for 400 new employees.

Extract from TJM’s financial statements for 2021 ($m)

Non-current assets 400

Current assets 300

Current liabilities 240

Profit for the year 200

Calculate working capital. Show your working.

..................................................................................................................................................................

..................................................................................................................................................................

..................................................................................................................................................................

.................................................................................................................................................................. [2]

[Total: 2]

4 Identify one cash inflow and one cash outflow a business might have.

Cash inflow: ............................................................................................................................................

Cash outflow: .......................................................................................................................................... [2]

[Total: 2]
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5 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 the table below. She wants to know how the closure of a competitor and an increase in
the minimum wage rate might affect her forecast.

Extract of Asmaa’s cash-flow forecast ($000’s)

January February March

Cash inflow 40 55 40

Cash outflow 50 35 35

Net cash flow (10) 20 5

Opening balance 50 40 60

Closing balance 40 60 65

Explain how the following changes might affect Asmaa’s cash-flow forecast.

Closure of a competitor: ..........................................................................................................................

..................................................................................................................................................................

..................................................................................................................................................................

..................................................................................................................................................................

Increase in the minimum wage rate: ........................................................................................................

..................................................................................................................................................................

..................................................................................................................................................................

.................................................................................................................................................................. [6]

[Total: 6]
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6 NPX is an online retail business. All orders are sent directly to customers from its warehouse. NPX employs
60 full-time workers. The Operations Manager is analysing NPX’s cash-flow forecast. An extract is shown
in the Table. To improve productivity, the manager plans to introduce new technology that can select and
pack all the items for each order. This will make 35 workers redundant. The technology will cost $40 000.
The manager is considering using either internal sources or external sources to finance this technology.

Explain two possible effects on NPX’s cash-flow forecast of introducing the new technology.

Effect 1:....................................................................................................................................................

..................................................................................................................................................................

Explanation:.............................................................................................................................................

..................................................................................................................................................................

..................................................................................................................................................................

..................................................................................................................................................................

Effect 2:....................................................................................................................................................

..................................................................................................................................................................

Explanation:.............................................................................................................................................

..................................................................................................................................................................

..................................................................................................................................................................

.................................................................................................................................................................. [6]

[Total: 6]
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7 SMR produces snack food using batch production. The snacks are sold to people watching sporting events
in city Y. SMR pays bonuses to motivate its 3 part-time employees. SMR has received complaints from
customers about the quality of the snacks. The business has forecast cash-flow problems in the coming
months. An extract from this cash-flow forecast is found in the table below.

Extract from SMR’s cash-flow forecast ($)

April May June

Total outflows 1400 1400 1300

Net cash flow (400) (500) Y

Opening balance 100 X (800)

Closing balance (300) (800) (1200)

Calculate the values of X and Y.

X: .............................................................................................................................................................

..................................................................................................................................................................

Y: .............................................................................................................................................................

.................................................................................................................................................................. [2]

[Total: 2]
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8 Explain two ways SMR could overcome its cash-flow problems.

Way 1: ......................................................................................................................................................

..................................................................................................................................................................

Explanation: ............................................................................................................................................

..................................................................................................................................................................

..................................................................................................................................................................

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Way 2 .......................................................................................................................................................

..................................................................................................................................................................

Explanation: ............................................................................................................................................

..................................................................................................................................................................

..................................................................................................................................................................

.................................................................................................................................................................. [6]

[Total: 6]

Calculate X and Y.

X:..............................................................................................................................................................

Y: .............................................................................................................................................................. [2]

[Total: 2]
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10 BVC makes a range of paints. It exports 60% of its products. The Managing Director has been looking at
BVC’s cash-flow forecast shown in the table below. He said: ‘Success is not just about our return on capital
employed.’ The Managing Director is worried about the introduction of new legal controls to protect the
environment. This will mean BVC will have to reduce the number of chemicals that are used to make paint.
He thinks these new legal controls will be bad for business.

Extract of cash flow forecast for the period July–September 2019 ($000)

Calculate the following values:

X:..............................................................................................................................................................

Y: .............................................................................................................................................................. [2]

[Total: 2]