CLW produces wood furniture, such as chairs and tables. Demand has increased rapidly over the last 3 years, so the business must expand the scale of production at its factory. The factory is situated close to the city in an area where unemployment is low. The Finance Director has drawn up a business plan, which includes a balance sheet. The Finance Director is satisfied with CLW’s liquidity.
(a)[2]
What does the term ‘business plan’ mean?
(b)[2]
What does the term ‘balance sheet’ mean?
(c)[4]
Identify and explain two possible benefits for CLW of keeping inventory (stock) at high levels.
(d)[6]
Identify and explain two factors (other than finance) that CLW’s management need to think about when increasing the scale of production.
(e)[6]
Do you think the Finance Director is correct to be pleased with CLW’s liquidity in 2014? Support your view with the data in Table 1 and suitable ratios.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A document that sets out the aims/objectives of the business and key information about its operations, finance and owners” …