Business 7115 · O Level · 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 provide a loan. Raul carries out most of the repair work, whereas Alex handles the accounts. Alex is surprised that the business has earned a small profit in the first year. ‘We can use this profit to expand. I do not see why people believe we would gain from having a business plan. A lot 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 the business.
(c)[4]
Identify and explain two reasons why working capital matters to Alex and Raul’s business.
(d)[6]
Identify and explain two advantages that Alex gains from having a business partner.
(e)[6]
Do you think Alex and Raul need a business plan if they want 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: “Debts/loans repayable after more than one year” …