Business 7115 · O Level · Cash-flow forecasting and working capital
Cash-flow forecasting and working capital — practice question
NMBJ produces a variety of cookies (biscuits) by means of batch production. In the previous year, profit rose by $1.5 million. The directors believe this happened because productivity improved and working capital was managed more effectively. NMBJ keeps inventory at a low level. NMBJ intends to raise the wages of all 300 employees by $50 per month from March. The Finance Director is concerned: ‘This decision will add $15 000 to wages each month. Many employees are leaving. Is paying higher wages the best way to improve motivation?’
(a)[2]
What does the term ‘productivity’ mean?
(b)[2]
Identify two reasons why a business may require working capital.
(c)[4]
Calculate the figures shown on the cash flow forecast.
W:
X:
Y:
Z:
(d)[6]
Identify and explain one advantage and one disadvantage for NMBJ of keeping inventory at a low level.
(e)[6]
Do you think paying higher wages is the best method for NMBJ to improve employee motivation? 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: “the relationship between a business’s output and its inputs” …