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
Identify potential liquidity issues
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Answer
To determine the months when Nic's Cafe may experience liquidity problems, we analyze cash flow patterns typical in small businesses. Liquidity problems often arise during months with lower sales, especially in seasonal businesses.
Step 2
Evaluate the options
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Answer
Given the options:
(A) October and November - October may have better sales, but November often sees a drop.
(B) November and December - November traditionally shows lower sales, which may lead to a liquidity issue, while December tends to be stronger due to holiday sales.
(C) November and January - January is typically a slow month following the holiday season which can exacerbate liquidity issues left from November.
(D) December and January - December should be stronger but January will be weak due to post-holiday slumps.
Based on this analysis, November appears to be a critical month.
Step 3
Select the best answer
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Answer
The option that indicates the two months in which Nic's Cafe might face liquidity problems is (B) November and December, as November holds significant risk and the transition into December could reflect on cash flow management.
