Identify and explain one action the owner of a pet-grooming salon could take to improve cash flow in June. Table 1 shows that the business has strong sales ...
Question 1 Report
Identify and explain one action the owner of a pet-grooming salon could take to improve cash flow in June. Table 1 shows that the business has strong sales bookings, but it has paid for new equipment before receiving all cash from customers.
| June cash forecast | Amount (£) |
|---|---|
| Opening balance | 350 |
| Cash received from customers | 2200 |
| Equipment purchase | 1800 |
| Wages and utilities | 1050 |
| Closing balance | -300 |
(a) Identify one source of external finance that could cover the short-term cash shortage. [1]
(b) Explain how asking customers for a deposit when booking could improve cash flow. [2]
Answer Details
(a) A suitable source of short-term external finance is a bank overdraft. [1] A short-term bank loan or trade credit would also be acceptable.
(b) Asking customers for a deposit means they pay some money before the grooming service is provided. [1] This brings cash into the business earlier, helping the salon meet June payments such as equipment, wages and utilities before all final customer payments are received. [1]
Download The App On Google Playstore
Everything you need to excel in your exams
