Finance - Cash Flow Problems + Solutions

Question 1

Give 3 solutions for fixing increasing wages

Answer 1

• Reduce staff hours→ Workers are paid less since lower hours worked
• Offer no overtime → Overtime workers don’t need to be paid that much
• Make redundancies → less staff = less wages to pay

Question 2

Give 2 solutions for fixing decreasing sales

Answer 2

• Increase selling price → gives product the image of quality, attracts customers
• Increase promotions → raises awareness of product

Question 3

Give 3 solutions for fixing increasing purchases

Answer 3

• Find a cheaper supplier → saves costs on raw materials
• Ask for bulk-buying discount → reduces price of raw materials
• Ask for trade credit → business do not have to pay immediatley, improves cash flow

Question 4

List the 5 cash flow problems

Answer 4

• Sales are decreasing
• Purchasing are increasing
• Wages are increasing
• Closing balances decreasing
• Paying for assets in full

Question 5

Give 2 solutions for fixing decreasing closing balance

Answer 5

• Reduce number of payments
• Find cheaper premises → reduces rent payments

Question 6

Give 2 solutions for fixing paying for the asset in full

Answer 6

• Lease the asset → monthly leasing costs are kept at a fixed amount
• Use hire purchase → business can purchase expensive machinery with only an initial deposit