Business (AS & A Level) · May / June 2023 · Paper 23 · Question 2

Great Desks (GD) GD is a co-operative owned by all of its employees. It manufactures desks for schools, offices and home use. The products are handmade using job production. GD uses just in time (JIT) inventory control. GD operates in a highly competitive market and uses personal selling to promote its products to wholesale and retail outlets. GD’s employees accept low salaries as most of their income comes from a share of profits at the end of the year. Following five years of rapid growth in sales and profits, GD plans to open its own retail shop. This is because the number of people who work from home is predicted to grow, which will lead to higher demand for desks for home use. GD will need $2m to open the shop. GD’s forecast cash flow from 2023 to 2025 is shown in Table 2.1. Table 2.1 GD’s forecast cash flow 2023 to 2025 ($m) 2023 2024 2025 Cash inflow Revenue 4.0 6.0 9.0 Total inflow 4.0 6.0 9.0 Cash outflow Utilities (power, water etc.) 1.5 1.5 2.0 Employee costs 0.5 0.5 0.5 Purchases 2.0 3.5 4.5 Marketing 3.0 5.5 5.0 Total outflows 7.0 11.0 12.0 Net cash flow (3.0) (5.0) Opening balance 9.0 6.0 Closing balance 6.0 1.0 GD’s employees are concerned about the management style of Steve, the Managing Director, who they say: • spends too much time trying to make people happy rather than solving problems • responds to opinions rather than setting long-term plans • fails to recognise threats to the business and does not see the need for new ideas • takes decisions on the votes of employees rather than the merits of the arguments. 5 10 15 20 25 30

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