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Ravi Sir and Sanjeev Sirs Nimble Education for Commerce and Humanities

ICSE,ISC,CBSE,IGCSE,AS & A,IBDP


Contact 9033311500, 8866611600
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MM : 58 BEP & Finance Time : 90 min
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Question 1
ABC Manufacturing produces wheels for cars. It holds high inventory levels so that one-off orders from
major car manufacturers can be satisfied quickly. The worlds big car manufacturers can be satisfied quickly.
The worlds big car manufacturers demand long credit periods from their suppliers of three months. The
finance manager has prepared the following cash flow forecast for the next three months:
$000 July August September
Cash Inflows
Cash from debtors 550 475 545
payments
Sale of old equipment 0 0 50
Total Cash in 550 475 595
Cash Outflows
Materials purchased 160 175 170
Employee costs 185 185 190
New computers 0 145 0
Other costs 155 125 135
Total Cash Out 500 630 495
Opening bank balance (75) (25) (180)
Net cash flow 50 (155) x
Closing bank balance (25) (180) y
(a)What is meant by net cash flow? [2]
(b)Identify two reasons why working capital is important. [2]
(c)Calculate the values for x and y in the cash flow forecast. Show your working. [4]
(d)Amend the cash flow forecast for July assuming cash from debtors and material costs are going to be
10% higher than originally forecast. Show your working. [6]
(e)Using the cash flow forecast above, advise ABC Manufacturing on the best ways for the business to
reduce its bank overdraft (negative closing balance). Justify your advice. [6]

Question 2
Joe is the new product manager at a chain of take-away food stores. He is planning to introduce a new type
of fast food a pizza or a curry. He has two product options but the business can only afford to buy the
equipment and advertising material needed for one of these options.
He has undertaken some market research and forecasted the main costs for the two product options.
He has asked you to help him complete the following tables.
Forecasts for one year Pizza option Curry Option
Sales Revenue 50,000 units @ $ 3 40,000 units @ $ 5
Cost of Goods Sold Unit cost of $ 1 each Unit cost of $ 2 each
Gross Profit
Annual equipment costs $ 13,000 $ 12,000

Ravi Sir and Sanjeev Sirs Nimble Education for Commerce and Humanities
ICSE,ISC,CBSE,IGCSE,AS & A,IBDP
Contact 9033311500, 8866611600
Ravi Sir and Sanjeev Sirs Nimble Education for Commerce and Humanities
ICSE,ISC,CBSE,IGCSE,AS & A,IBDP
Contact 9033311500, 8866611600
Annual advertising costs $ 15,000 $20,000
Other expenses $ 13,000 $ 15,000
Net Profit
(a)Fill in the totals for the sales revenue and the cost of goods sold. [4]
(b)Calculate the gross profit and net profit of both product options. [4]
(c)Identify and explain two other factors Joe should consider before making the decision. [4]
(d)Joe finally decides on the curry option. After one year, he finds that profit from this product is much lower
than expected. Evaluate two ways which Joe could use to try to increase profits from this product. [4]

Question 3
Income Statement or Profit-Loss
Account Balance Sheet
Your goal is to find the Gross and Lists the assets (what you own) and
Net Profit liabilities (what you owe)
Remember the formulas for Gross To find the Working Capital, simply
and Net Profit: subtract current liabilities from
Gross Profit= Revenue cost of sales current assets
Net Profit= Gross Profit- expenses
Using the following data, create an Income Statement for 2013. You will need to calculate the Gross Profit,
the formula is above. Once you have the Gross Profit, you can then calculate the Net Profit.
Use the following data:
(a) 100,000 Income from Sales, 30,000 cost of sales, find the Gross Profit. [1]
Expenses are the following: 30,000 in wages, 10,000 in utilities, 5000 in materials, and 5000 in
advertising.
(b)What is the Net Profit? [1]

Create a Balance Sheet, using the following data. [6]


Mark set up his business last month with 3500 he saved and a 2500 bank loan. Mark also spent 2000 on a
large van, and 1000 on a new Apple computer. Mark currently has 1600 of stock, which he has bought from
his friend Mike, a creditor, and now has 2200 in the bank. Mark has also sold his goods, worth 800, to
another friend, Vincent, who promises to settle up with him soon. What will his balance sheet look like?
In 2012, Marks Gross profit margin was 60% and Net profit margin was 35%.
(a)Why is the net profit margin lower than the gross profit margin? [2]
(b)In your opinion, which year was better in terms of performance? [6]
In 2013, Marks main competitor Georges Gross profit margin was 55% and Net profit margin was 15%.
(c) In your opinion, which business was better in terms of performance? [6]

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Ravi Sir and Sanjeev Sirs Nimble Education for Commerce and Humanities
ICSE,ISC,CBSE,IGCSE,AS & A,IBDP
Contact 9033311500, 8866611600