The following case study is about Noor, who runs a mobile bicycle-repair service. Fig. 1 shows the information screen on Noor's banking app after a busy wee...
Question 1 Report
The following case study is about Noor, who runs a mobile bicycle-repair service. Fig. 1 shows the information screen on Noor's banking app after a busy weekend. Customers have used contactless payments, bank transfers and cash. Noor uses the app to see whether there is enough money to buy new repair products on Monday morning. The local bank is closed until 09:00, so Noor cannot ask a cashier for a balance before then. Noor is also considering whether to arrange an overdraft facility, because some customers pay several days after repairs have been completed.
Use Fig. 1 and the case study to answer the following questions.
(a) Which one of the following is shown on the app as money available to use: £680, £09:00, or £20? Select your answer. [2]
(b) Which two banking actions could Noor complete using the app before the bank opens? [3]
(c) Which reasons explain why an overdraft may be useful to Noor's business at some times of the year? [4]
(d) Which reason explains why Noor should not treat an overdraft as extra profit from sales? [3]
Answer Details
(a) The money available to use is £680. [1] The app labels this amount as “Available money”, so it is the balance available for Noor to use. [1]
(b) Before the branch opens, Noor can use the app to view transactions, check the available balance and make a payment. [3] Transferring money is also available. These actions can be completed because app access does not depend on a cashier or an open branch.
(c) An overdraft may be useful because it allows Noor to pay for repair products before customers have paid for completed repairs. [1] It covers a short-term cash shortage, [1] helping the business continue trading and buy urgent equipment. [1] It can also help when sales are uneven or seasonal. [1] However, it is money that must be repaid.
(d) An overdraft is borrowed money, or credit, rather than profit made from sales. [1] Noor must repay it to the bank, [1] and interest or charges may be payable. [1] Sales profit belongs to the business after costs; an overdraft creates a debt.
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