Working Capital (2.1.1)

Question 1

What are the two reasons for a business needing cash?

Answer 1

1. Pay short-term debts which is essential to stay afloat
2. Expansion which is essential to grow your business

Question 2

What are some short-term debts a business has to pay?

Answer 2

-Wages/Salaries
-Suppliers
-Insurance
-Utility Bills
-Rent/Mortgage Payments
-Repairs

Question 3

What are some ways by which a business can expand?

Answer 3

-New Vehicles
-New Locations
-Marketing
-New Products
-New Technology
-New Staff

Question 4

What is a Cash Flow Sink?

Answer 4

It shows the money coming in and going out.

Question 5

What do you want for the cash flow sink? (money)

Answer 5

You want the money to be coming in at a faster rate than the money going out

Question 6

What is money in the sink called?

Answer 6

Working Capital

Question 7

What is Working Capital used for?

Answer 7

Its what we use to pay utilities, wages, suppliers and any sudden bills

Question 8

If revenue exceeds costs what will the working capital be? (high or low)

Answer 8

The working capital will be high

Question 9

What should a business do if they have too much Working Capital?

Answer 9

They should expand

Question 10

If costs exceed revenue, what will the working capital be? (high or low)

Answer 10

The working capital will be low