Business (AS & A Level) · May / June 2023 · Paper 22 · Question 1

Office Furniture Designs (OFD) Markus is an entrepreneur and is planning to set up a private limited company called OFD in four weeks’ time. OFD will be an online retailer selling office furniture directly to business customers. Products will be sent directly to customers from OFD’s warehouse. OFD’s product range will include office chairs, desks and filing cabinets. Markus will have limited start-up funds. OFD will operate in a competitive market and Markus is keen to offer high-quality customer service. He also will have to think carefully about opportunity cost. As part of his business planning, Markus has prepared a cash flow forecast (see Table 1.1). Table 1.1 OFD’s cash flow forecast June – August 2023 ($ 000) June July August Cash inflow Cash sales 8 12 15 Credit sales 0 15 24 Total inflow 8 27 39 Cash outflow Supplies 25 32 34 Utilities 3 3 4 Rent 15 15 15 Salaries 10 11 11 Operating expenses 5 7 8 Total outflow 58 68 72 Net cash flow (50) (41) Opening balance 10 (40) Closing balance (40) (81) Markus plans to offer all customers one month trade credit. However, as OFD is a new business, suppliers may insist on payment on delivery. Markus is currently researching sources of finance to improve OFD’s cash flow. OFD will need five employees who will work in the warehouse and three customer service assistants. Markus plans to offer two weeks of induction training to all employees. 5 10 15 20 25

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