In which two months might Nic’s Cafe experience a liquidity problem?
(A) October and November
(B) November and December
(C) November and January
(D) December and January - HSC - SSCE Business Studies - Question 14 - 2005 - Paper 1
Question 14
In which two months might Nic’s Cafe experience a liquidity problem?
(A) October and November
(B) November and December
(C) November and January
(D) December and Ja... show full transcript
Worked Solution & Example Answer:In which two months might Nic’s Cafe experience a liquidity problem?
(A) October and November
(B) November and December
(C) November and January
(D) December and January - HSC - SSCE Business Studies - Question 14 - 2005 - Paper 1
Step 1
Evaluate the Options
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Answer
To determine when Nic's Cafe might face a liquidity problem, we need to analyze potential factors such as cash flow, sales cycles, and expenses during the months in question. Since the answer options focus on combinations of two consecutive months, we will look for signs of financial distress that might occur during these periods.
Step 2
Consider Seasonal Trends
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Answer
Investigate if Nic’s Cafe experiences seasonal variations in sales. For example, some cafes might see reduced customer visits post-holiday (e.g., after October and in November), suggesting potential liquidity issues due to dropped revenue.
Step 3
Identify High Expense Periods
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Answer
Examine the months for increased operational costs. If inventory purchases or other expenses significantly rise in November, it could pair with lower revenues leading to cash flow issues.
Step 4
Conclusion
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Answer
Based on typical business patterns, November is often a month where businesses may struggle financially after post-holiday spending. Thus, the most likely pair is November and December, as suggested in option (B).
