## Case study (2) - profit and cash flow

Many businesses have seasonal demand patterns. This question enables you to test your knowledge of profit and cash flow, and to practise working by examining a case study, extracting data, and making appropriate calculations. Do not try to be quick, just careful!

A farmer grows rape seed on her farm. She has 40 hectares of usable land. She expects a yield of 8.5 tons/hectare and should receive \$100 cash per ton from the buyer, and \$25 per tonne as a subsidy payment from the EU Agricultural Support budget. She grows one crop per year, which she sells in August. In September she buys and plants seeds, 4 tons at a price of \$250 per ton. She buys fertiliser in November and March; 15 tons each time at \$80 per ton. She pays herself \$450 per month and also pays \$500 four times each year for assistance in seeding September, fertilising and reaping in November, March and August. She pays rent of \$1,500 in January, April, July and October, and taxes of \$1,700 in May. All transactions are in cash.

At the start of this growing season she had \$3,000 in the bank.

#### Question 1

How much profit will she expect to make this season?

#### Question 2

Will she need to arrange an overdraft with her bank?

Hint: You need a table, by month, to work this out correctly.

#### Question 3

If she does need an overdraft, when will she need it and how much should she ask for?