Business 0450 · IGCSE · Cash-flow forecasting and working capital
Cash-flow forecasting and working capital — practice question
NMBJ produces several kinds of cookies (biscuits) through batch production. In the previous year, profit rose by $1.5 million. The directors believe that this happened because productivity improved and working capital was managed more effectively. NMBJ keeps inventory at a low level. From March, NMBJ intends to raise the pay of all 300 employees by $50 per month. The Finance Director is concerned: ‘This choice will add $15 000 to wages each month. Many employees are leaving. Is increasing wages the best way to raise motivation?’
(a)[2]
What is meant by the term ‘productivity’?
(b)[2]
Identify two reasons why a business could need working capital.
(c)[4]
Calculate the values shown in the cash flow forecast: W, X, Y, Z.
(d)[6]
Identify and explain one benefit and one drawback for NMBJ of keeping inventory at a low level.
(e)[6]
Do you think paying higher wages is the best method for NMBJ to raise employee motivation? Support your view.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “The amount of output a business produces in relation to the inputs it uses” …