Business 0450 · IGCSE · Cash-flow forecasting and working capital
Cash-flow forecasting and working capital — practice question
Alex and Raul are business partners. They set up a bicycle-repair business using their own savings because the bank would not agree to lend them any money. Raul carries out most of the repair work, while Alex is responsible for the accounts. Alex is astonished that the business has earned a small profit in its first year. ‘We could put this profit towards expansion. I do not understand why people say we would gain from having a business plan. A large share of the demand for our repair business comes from our friends who own bicycles.’
(a)[2]
What does the term ‘non-current liabilities’ mean?
(b)[2]
Calculate the working capital for this business.
(c)[4]
Identify and explain two possible reasons why working capital matters to Alex and Raul’s business.
(d)[6]
Identify and explain two benefits to Alex of having a business partner.
(e)[6]
Do you think Alex and Raul need a business plan for the business to succeed in the future? Justify your answer.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Loans or debts that are repaid after more than one year” …