Accounts and finance

Table of Contents

1. Topic pack - Accounts and finance - introduction
2. 3.1 Sources of finance - notes
3. 3.1 Sources of finance - questions
4. 3.2 Investment appraisal - notes
5. Investment appraisal
6. 3.2 Investment appraisal - questions
7. 3.3 Working capital - notes
8. 3.3 Working capital - questions
   1. Working capital - short exercises
   2. Cash flow forecasts - case study - cash flow management
   3. Cash flow forecasts - short answer questions
   4. Cash flow forecasts - numerical questions
   5. Case study (1) - profit and cash flow
   6. Case study (1) - profit and cash flow
   7. Case study (2) - profit and cash flow
   8. Awash with cash
   9. Awash with debt
9. 3.4 Budgeting - notes (HL only)
10. 3.4 Budgeting - questions
11. 3.5 Final accounts - notes
12. 3.5 Final accounts - questions
13. 3.5 Final accounts - simulations and activities
14. 3.6 Ratio analysis - notes
15. 3.6 Ratio analysis - questions
16. 3.6 Ratio analysis - simulations and activities
17. Printable version

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?