Business 7115 · O Level · Statement of financial position
Statement of financial position — practice question
Josh runs an office cleaning business and has a mix of large and small business clients. He employs 6 full-time cleaners, all of whom receive off-the-job training. Josh thinks that using the newest cleaning equipment raises added value. He said: ‘Customers are happy with the service. I am always sending text (SMS) messages to workers about additional work.’ Josh has been studying his balance sheet. He is unsure whether a bank loan is the best source of finance for buying new equipment. The new equipment will cost $60 000.
Table 1: Extract from Josh’s balance sheet as at 30 April 2017 ($000): Current assets = 120; Trade receivables = 90; Cash = X; Current liabilities = Y; Net current assets = 70.
(a)[2]
What does the term ‘trade receivables’ mean?
(b)[2]
Calculate the values below.
$X$:
$Y$:
(c)[4]
Identify and explain one advantage and one disadvantage for Josh of using text (SMS) messages for internal communication.
(d)[6]
Identify one advantage and one disadvantage for Josh of using off-the-job training.
(e)[6]
Do you think a bank loan would be the best source of finance for Josh’s new equipment? 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: “Sum owed by customers for goods bought on credit terms” …