Table 1 shows monthly cash-flow information for Sparkle Events, a business that decorates wedding venues. The owner is considering accepting a large booking...
Question 1 Report
Table 1 shows monthly cash-flow information for Sparkle Events, a business that decorates wedding venues. The owner is considering accepting a large booking that will require supplies to be paid for before the customer's final payment is received.
| Month | Opening balance ($) | Cash inflows ($) | Cash outflows ($) |
|---|---|---|---|
| June | 8,500 | 12,000 | 15,500 |
| July | 5,000 | 18,000 | 21,000 |
(a) Show the closing cash balance for June. [2]
(b) Identify the opening cash balance for July. [1]
(c) Explain one way Sparkle Events could improve its cash position before taking the booking. [3]
Answer Details
(a) Closing cash balance is calculated as opening balance plus cash inflows minus cash outflows:
\[\$8{,}500+\$12{,}000-\$15{,}500=\$5{,}000\]
[2]
(b) The opening cash balance for July is $5,000. [1] The closing balance of one month becomes the opening balance of the next month.
(c) Sparkle Events could ask the customer for a deposit before purchasing supplies. [1] This brings cash into the business earlier. [1] It reduces the risk of needing an overdraft or being unable to pay suppliers before the customer’s final payment arrives. [1]
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