Use this Financial Information and Decisions hub to connect finance sources, cash-flow data, accounts and ratio interpretation in cases.
Avtar owns a car repair business which operates in the private sector. It is a small business with 2 full-time employees. Avtar wants to find out the best way for a business to increase added value. Avtar's business needs finance for many reasons. Avtar wants to know how an economic recession might affect his business.
Outline one reason why Avtar might need each of the following types of finance:
Short-term finance:
Long-term finance:
ACP manufactures computers. Being ethical is important to ACP. The business employs 3000 workers in its factory. ACP imports 65% of its raw materials. As internal users of accounts, the directors plan to analyse ACP's financial performance using profitability ratios. The Finance Director thinks making a profit is more important for a business than managing its cash flow.
Identify two external users of accounts.
User 1:
User 2:
Identify two profitability ratios.
Ratio 1:
Ratio 2:
Do you think making a profit is more important for a business than managing its cash flow? Justify your answer.
Alana opened a restaurant in the city centre 5 years ago. The restaurant provides plant-based meals using a range of vegetables. Alana uses primary market research to help identify changes in consumer spending patterns. Market research can also be used to help segment a market. The restaurant has 16 employees. Each employee is paid the legal minimum wage. In 2023 the business made a profit of $ 80000. Alana wants to know how an increase in interest rates might affect her business.
Define 'profit'.
WFT is a primary sector business which harvests timber (wood) from trees. The Operations Manager knows there are many legal controls over business activity affecting the environment. WFT has 30 employees and uses a lot of technology to process the timber. The business is always considering ways to increase added value. WFT often needs finance. An extract from WFT's statement of financial position is shown in Table 1.1.
Table 1.1
Identify one non-current asset and one non-current liability.
Non-current asset:
Non-current liability:
Explain two factors WFT should consider when deciding on a source of finance.
Factor 1:
Explanation:
Factor 2:
Explanation: